ICICI, HDFC Bank, Axis need Rs 70K capital for Basel III: Fitch
Ratings agency Fitch on Friday said the top three private sector lenders--ICICI Bank, HDFC Bank and Axis Bank--will require close to Rs 70,000 crore in fresh capital to meet the stricter Basel-III capital norms.
Mumbai: Ratings agency Fitch on Friday said the top three private sector lenders--ICICI Bank, HDFC Bank and Axis Bank--will require close to Rs 70,000 crore in fresh capital to meet the stricter Basel-III capital norms.
"Fitch's early estimates for these three banks suggest that they collectively would require close to Rs 70,000 crore (around USD12.5 billion) by FY18, which would need to be planned," it said in a note.
Of the three, Axis Bank, which manages its capital position very tightly, would need to start planning at the earliest, it added.
Against this, the 24 state-run banks need a much larger capital infusion, running into a whopping Rs 2.5 trillion, according to the government estimate.
Following the post-Lehman credit crisis of 2008, a majority of the central banks around the world tightened the capital adequacy norms for lenders which will ring-fence them from any eventual stress.
The 2008 crisis has seen most of the leading global banks such as Citi, Bank of America, Goldman Sachs, among others, being bailed out by their governments with taxpayers money.
The norms, called Basel-III, are to be implemented by the end of 2017-18 and the banks have been asked by the Reserve Bank to take steps in that direction.
Fitch said it expects all the banks to be active on accessing capital starting FY16 to meet the revised capital adequacy requirements.
The rating agency also retained the ratings of all the three lenders for both national and international long-term debt instruments.
The long-term foreign currency rating of ICICI Bank and Axis Bank have been rated 'BBB-', in line with the country's sovereign rating, while the national long term ratings of both Axis Bank and HDFC Bank have been rated as 'Fitch AAA(ind)', it said.
The outlook on the foreign currency ratings, however, is negative in line with the sovereign rating outlook, while the national long-term ratings are stable, it added.
"The affirmations factor in the strength of franchise, steady and consistent performance on various aspects of the credit metrics, particularly asset quality, funding and profitability," the agency said.
The agency had a word of praise for HDFC Bank among the troika and said, "its performance has been consistently superior through cycles to that of the other two private banks."
It also said HDFC Bank's ability to withstand stress is higher than the other two rivals (Axis and ICICI) because of its robust margins, strong funding structure and loan book diversity.