New Delhi: State Bank of India's Chairman Pratip Chaudhuri Friday said it plans to approach global credit rating agency Moody's Investors Service to reverse the last year's downgrade on its standalone rating, following announcement of the bank's robust performance in the Jan-Mar quarter.
SBI posted a near 200 times jump in its net profit during the quarter to Rs 40.50 billion on-year on a lower base, and helped by drop in provisioning for bad loans, lifting its stocks by as much as 5%.
Earlier in October 2011, Moody's had downgraded its bank financial strength rating (BFSR) on SBI by one notch to 'D+' from 'C-' in view of the bank's weak tier I capital and deteriorating asset quality.
As per Moody's definition, banks rated 'C' have "adequate intrinsic financial strength", while those rated 'D' have "modest intrinsic financial strength, potentially requiring some outside support at times".
SBI's gross non-performing assets, or bad loans, fell on a sequential basis to 4.44% as on March 31, 2012 from 4.61% as on December 31, 2011, while its net non-performing assets also eased to 1.82% from 2.22%.
The bank also posted a healthy net interest margin (NIM) for the March quarter at 3.89%, while its tier I capital at 9.79% at the end of the quarter was higher than the government mandated 8%.
Earlier this year too, Chaudhuri had said that the bank will approach rating agencies, particularly Moody's, for ratings upgrade after infusion of Rs 79 billion by the government, while Moody's had clarified that ratings are done based on the company's core business fundamentals and not on the external fund infusion.
"BFSRs represent Moody's opinion of a bank's intrinsic safety and soundness and, as such, exclude certain external credit risks and credit support elements that are addressed by Moody's Bank Deposit Ratings," Moody's spokesperson had said, adding, "BFSRs do not take into account the probability that the bank will receive such external support..."
Indian banks' asset quality is under pressure on account of high interest rates, muted economic growth, mounting restructured loans and high exposure to financially weak sectors like power and aviation.
Notably, earlier this month, Moody's downgraded standalone bank financial strength and hybrid ratings of India's three largest private sector lenders ICICI Bank, HDFC Bank and Axis Bank, in line with the sovereign rating of the nation.
Recently, another global credit rating agency Standard & Poor's (S&P) cut outlook on its long-term counterpart credit ratings on 11 major Indian public and private sector financial institutions, including State Bank of India, ICICI Bank, HDFC Bank and Axis Bank to 'negative' from 'stable', but kept ratings unchanged while warning of a potential downgrade depending on their asset quality and India's sovereign rating.
Shares of State Bank of India Friday ended at Rs 1,942 on the Bombay Stock Exchange, up 5.08% from the previous close.