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Axis Bank Shares Fall 5% As S&P Downgrades It To Junk Rating

Staff

On Monday, shares of Axis Bank fell nearly 5 percent to Rs 404.25 after S&P Global Ratings lowered its credit rating to below investment grade on increased economic risks for banks and financial institutions in India due to the coronavirus pandemic

On Friday, the rating agency downgraded Axis Bank's issuer credit rating to BB+/stable/B from BBB-/negative/A-3 earlier. When a bond's rating drops into the double B category, it falls into the junk bond territory.

"We lowered our ratings on Axis to reflect our expectation that heightened economic risks facing India's banking system will affect the bank's asset quality and financial performance," S&P said in a release.

"While Axis' asset quality is superior to the Indian banking sector average, its level of non-performing assets (NPAs) will likely remain high compared to international peers'. Nevertheless, we expect the bank to maintain its strong market position and adequate capitalization," it added.

Axis Bank provides clarification

On Saturday, Axis Bank in a stock exchange filing clarified that S&P Global ratings inadvertently mentioned the bank being on credit watch.

The bank in the statement asked investors to "please note that as confirmed by S&P, the rating report inadvertently mentions the Bank being on CreditWatch. In this regard, S&P has confirmed that it is an editorial error and Bank is on STABLE outlook."

"We wish to inform you that, the domestic debt instruments issued by the Bank continue to be rated 'AAA / AA+' by all four rating agencies, i.e. CRISIL, ICRA, CARE and India Ratings," it added.

S&P had downgraded ratings of Axis Bank and four Indian non-bank financiers, citing worsening operating conditions as a result of the COVID-19 pandemic.

The rating agency said it could further lower the ratings on Axis Bank if its stressed assets rise significantly beyond the system average over the next few quarters. It added that an upward revision will be contingent upon its asset quality turning significantly superior to that of domestic peers and commensurate with international peers over the next 18 months.

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