Moody's concerns overblown, misplaced: SBI
Country's largest bank SBI Tuesday dismissed the concerns raised by Moody's while downgrading its debt rating, saying that the issues cited by the global credit ratings agency are "overblown and misplaced".
Mumbai: Country's largest bank SBI Tuesday dismissed the concerns raised by Moody's while downgrading its debt rating, saying that the issues cited by the global credit ratings agency are "overblown and misplaced".
"We had explained our views to Moody’s, allaying their concerns on debts, deposits as well as recapitalisation, but still they went ahead with downgrade. We believe Moody’s is overly concerned, and that is completely misplaced," SBI MD and CFO Arundhati Bhattacharya said.
At a press conference this evening attended by all the four Managing Directors of the bank, she said: "What Moody’s feels is their view and we don’t subscribe to that. SBI is and will remain the banking champion of the nation. We have no difficulty in raising deposits with our nationwide presence nor do we have any means in raising funds.
"We still have the highest rating amongst the public sector banks when it comes to bank’s financial stability rating (BFSR) from Moody’s."
The agency yesterday downgraded the senior unsecured debt and local currency deposit rating of SBI by a notch to 'Baa3' from 'Baa2', citing asset quality and recapitalisation concerns.
It said: "A combination of increasing pressure on credit fundamentals and ongoing reliance on fiscally constrained government to maintain capital at levels desired by regulators argue for appropriateness of supported debt and deposit ratings at a level no higher than the sovereign," it said.
Discounting the agency’s fears on the bank?s ability to recapitalised, Bhattacharya said: "We don’t believe that Moody’s concern on recapitalisation is right. They have their views, but that is not our views. We do believe that they are not completely right in its rating action. We have many ways to raise capital including bringing the government stake down from 62.3 percent now to raise capital."
Moody's had said the ongoing gloom on the economic front will impact the asset quality, with its loan impaired ratio already touching 8.6 percent, with a heavy increase in the April-June quarter.
The spike in NPLs illustrates that the bank's asset quality is under pressure, it had added.
Besides, Moody's said SBI will have to compete with other state-run banks for its share in the Rs 14,000 crore allocated in the Union Budget.
"Given the importance of expected capital injections to maintain SBI's Tier 1 ratio above the regulator's 8 percent target, Moody's believes it is no longer appropriate to assign a higher supported rating to SBI than that of the sovereign," it said, adding that though the rating outlook is "stable", an upgrade is "unlikely" given the challenging economic climate.
Bhattacharya said: "We have no reason to believe that why the government will not recapitalise us and therefore there is no room for concern."
She said that with the largest network of branches and being the largest bank, "there is no reason why we cannot raise money from the market. If deposit collection has been an issue how come our market share in the space went up from 16.29 percent to 16.73 percent last fiscal and maintain a Casa of 46 percent?"
When asked whether the downgrade will impact the bank’s overseas debt raising plans, MD and international banking head Hemant G Contractor answered in the negative, saying that this per se will have no bearing the cost of funds for the bank.
Bhattacharya also said there has been no major rise in NAPs or loan recast applications during the second quarter, thanks the many measures taken by the bank.
She admitted, however, that the bank needs to improve profitability and bring down the bad loan ratio which jumped to 5.6 percent in Q1.
On asset quality concerns expressed by Moody’s, she pointed out that banking reflects the real economy and even a growth rate of 4.4 percent or 5 percent is not as low as Moody’s is being made out.
When asked if over 20 percent credit growth is not risky as the economy is growing only at 4.4 percent, which was a concern another rating agency Fitch expressed yesterday, MD and national banking head A Krishnakumar said that after considering inflation, and the nominal GDP growth, he doesn’t think that the bank is heading to a risk growth.
He further said the above industry uptick in loan growth has been primarily driven by the crashing of the CP and CD market, as rates there have been jumped too high, forcing large corporate to come to banks for funds.
Also, he said, most of the credit demand is coming in from well-rated, investment grade companies.