MUMBAI: Ratings firm Standard and Poor's or S&Ps has lowered the standalone rating of the country's largest lender State Bank of IndiaBSE -2.32 % and Union Bank rating on concerns over their asset quality.
The ratings firm revised the stand-alone credit profile (SACP) of SBI to 'bbb-' from 'bbb' and that of UBI to 'bb+' from 'bbb-' based on our anticipation of the banks' weak asset quality performance.
We revised the SACPs of SBI and UBI because we expect the banks' asset quality to remain weak and credit costs to stay high." said a release "by Standard and Poor's.
The ratings firm has revised its r risk position assessment on these banks to ""moderate"" from ""adequate.". It expects SBI's and UBI's asset quality to remain stressed in the fiscal years ending March 31, 2013, and 2014, partly due to continued slippages in their restructured loan books.
SBI's gross nonperforming loan (NPL) ratio of 5% (on a stand-alone basis) as of June 30, 2012, is the highest among the Indian banks that it rates. On a stand-alone basis, the bank's mid-corporate (NPL: 9.3%) and agriculture (NPL: 9.8%) portfolios are particularly stressed.
NPLs in UBI's agriculture portfolio have also surged. The bank's SACP is in a speculative-grade category . Moreover, the bank has asset concentration in its infrastructure portfolio, especially in the power sector, which is facing challenges, such as fuel shortages, delays in securing environmental clearances, and a slow pace of tariff reforms.
S&P has also lowered the issue ratings on UBI's hybrid issues (upper Tier 2 subordinated and hybrid Tier 1 notes under the bank's medium-term notes program) to 'B+' from 'BB'.
But the ratings firm affirmed its 'BBB-' long-term and 'A-3' short-term issuer credit ratings on seven government-owned banks in India. The outlook on all the long-term ratings is negative. The banks are: Bank of India (BOI; BBB-/Negative/A-3), IDBI Bank Ltd.BSE -1.85 % (IDBI; foreign currency BBB-/Negative/A-3), Indian Overseas BankBSE -2.56 % (IOB; BBB-/Negative/A-3), Indian Bank (BBB-/Negative/A-3), State Bank of India (SBI; BBB-/Negative/A-3), Syndicate BankBSE -1.81 % (BBB-/Negative/A-3), Union Bank of IndiaBSE -1.80 % (UBI; BBB-/Negative/A-3).
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