Mumbai: Global rating agency Moody's has affirmed State Bank of India's (SBI) local and foreign currency deposit ratings at Baa3/P-3.
In an official statement, the agency said that the outlook of SBI and its branches is positive.
It also affirmed the (P)Baa3 ratings on the bank's and its branches' senior unsecured medium-term note (MTN) programme, and the Baa3 rating on the senior unsecured debt issued from its London branch.
"The rating actions reflect our view of the country's 'moderate' macro profile, the bank's standalone financial profile and Moody's 'very high' government support assumptions for SBI," the agency said in a report affirming its ratings.
The bank's asset quality has deteriorated in recent years due to exposures in the corporate and infrastructure segments, the statement said.
"Such asset deterioration includes a rise in impaired loans and standard restructured loans, and a smaller cushion to absorb losses, as seen by SBI's low provision coverage and lower tier 1 capital ratio relative to other large banks in emerging markets," it added.
SBI is unlikely to manage down its NPLs in next 12-18 months, given the continued challenges in the domestic corporate sector, the statement said.
"Despite these credit challenges, amongst other public sector banks, we expect SBI is best placed to capture the benefits of the improving macro-economic profile of the country as well as the initiative undertaken by the government to ease pressure on corporate asset quality," it added.
Moody's assessment of the very high probability of support to SBI in the event of financial distress considers the bank's importance to the domestic banking industry, and its close relationship with the government that owns 59.2 percent in the bank.
"On the back of this assessment, the deposit rating of Baa3 receives a one-notch uplift from the BCA of Ba1," Moody's said.
The rating agency has affirmed SBI's baseline credit assessment (BCA) and adjusted BCA of Ba1.
It has assigned a counter-party risk assessment (CR assessment) of Baa3 / P-3 to SBI and its branches.
The rating agency has withdrawn the outlooks on all junior instrument ratings for its own business reasons.
