Moody's reaffirms rating of ICICI Bank

"Moody's believes that the probability of systemic support for ICICI Bank is high, given its sizeable retail deposit franchise as well as its importance to the national payment system as the second-largest commercial bank," the ratings agency said.

The reiteration of a financial strength rating of 'C-' for ICICI Bank came a day after Moody's downgraded SBI from 'C-' to 'D+' on account of the public sector lender's deteriorating asset quality and rising non-performing assets (NPAs).

A 'D' rating suggests "modest intrinsic financial strength, potentially requiring some outside support at times", while a 'C' rating denotes "adequate intrinsic financial strength".

On ICICI Bank, Moody's said the rating reflects the bank's solid franchise as the second-largest commercial bank in India.

"In addition, strong capitalisation, liquidity and earnings profile support the rating. "The rating also reflects its high borrower concentration in the form of mandatory government securities portfolio, weaker asset quality compared with peers, a difficult operating environment due to rising interest rates, uncertainty in the global economy and the intense competition it faces in domestic markets," Moody's said.

ICICI Bank, India's largest private sector lender, has an asset base of USD 90 billion. The private lender had over 2,500 branches and over 6,000 ATMs at the end of last fiscal.
It has three main business lines -- retail banking; wholesale banking, including corporate and investment banking; and international banking.

According to Moody's, after consolidating its business for two years in order to overcome the difficult economic conditions and rising delinquency in consumer loans, ICICI Bank posted moderate asset growth of 12 per cent in 2010-11.

"By leveraging its technological investments and favorable personnel profile, it has developed systems and procedures to offer efficient banking services to Indian customers. The acquisition of Bank of Rajasthan in August, 2010, has also helped in strengthening the franchise and branch network in northern India," it said.

According to Moody's, ICICI Bank is one of the few financial services brands from India that is recognised in developed Asian and Western financial markets.

"ICICI Bank has also been a forerunner in developing financial products that meet the growing needs of Indian corporates and retail consumers. This has resulted in a strong and diversified earnings profile," Moody's said.

The agency said corporate loans and secured retail loans will be the growth drivers for the bank in the future.

"It has a market share of around 6 per cent in deposits and banking assets and is closely intertwined with the fundamentals of India's economy," Moody's said.

The bank has a diversified earning profile, with corporate and retail loans contributing 21.3 per cent and 38.7 per cent, respectively, to its total business.

The remaining loans are spread across the rural sector (9.7 per cent), small and medium enterprises (4.8 per cent) and overseas locations, which are primarily corporate loans (25.5 per cent).
The ratings firm also pointed to ICICI Bank's capital adequacy ratio, which is 19.6 per cent, and core Tier-I ratio of 13 per cent to justify its rating.

"It has been able to control net addition to gross NPAs by increasing its recovery efforts," Moody's said.

The credit ratings agency had in September last year assigned a 'C-' rating to ICICI Bank and said it has a strong franchise and sound financial position.

ICICI Bank reported a 53 per cent growth in consolidated net profit to Rs 1,667 crore during the first quarter of 2011-12 from Rs 1,091 crore in the same period last fiscal.

Its total income went up by 8.9 per cent during the quarter ended June 30 to Rs 14,749 crore from Rs 13,535 crore in the same period of the previous fiscal.