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S&P has no plan to revise SBI rating post-capital infusion

india Updated: Mar 13, 2012 22:30 IST
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Global rating agency Standard & Poors on Tuesday said the proposed Rs 7,900 crore capital infusion into State Bank of India will not help the country's largest lender better its credit rating.

"Even if the government support comes, SBI's rating won't change in the short-term. A large capital infusion may change our view. But for the short-term, we are not planning to change our credit rating for the bank," S&P India credit analyst Geeta Chug said.

This means that the Rs 7,900-crore capital infusion by the centre will not make any tangible impact on SBI's current rating, which is pegged at BBB-/Stable by S&P.

S&P's peer Moody's had downgraded SBI by a notch in a surprise move on concerns over insufficient capital base and asset quality last October, resulting in the bank shares sliding to a two year low.

However, S&P had retained its rating for SBI of BBB-/Stable.

After the government consented to infuse Rs 7,900 crore into the bank, chairman Pratip Chaudhuri had said the bank would be approaching rating agencies, Moody's in particular, asking for a ratings upgrade.

Chaudhuri had said the infusion, which would be done before March 31, would take SBI's core capital adequacy to over 9% from the 7.59% as on December 31.

However, concerns about bank's asset quality remain with the gross non-performing assets being at an all time high of over Rs 40,000 crore.

S&P, meanwhile, maintained stable credit rating for the domestic banks, even as it warned that the banks are likely to face significant headwinds on the asset quality as well as margins front if economic growth further loses momentum.

"There are some downside risks to the standalone asset quality of these banks, especially the public sector ones, which are likely to face significant headwinds. So their margins are likely to fall by 20 basis points next fiscal to 2.5%. However, overall we maintain stable outlook for their credit rating," Chug said on a conference call.

It also pegged GDP growth to be at 6.8% (below the government projection of 6.9%) this fiscal and 6.5% in the next.

However, she said, S&P is positive about the private sector banks as they will be improving asset quality in fiscal 2012.