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Moody's brings ICICI Bank on par with SBI

BS Banking Bureau

Moody's Investor Service has assigned a rating of 'D+' to ICICI Bank for its financial strength rating.

This would place the FSR rating of ICICI bank on par with the State Bank of India. The other pubic sector banks have a lower rating.

According to Moody's the 'D+' FSR reflects ICICI Bank's strong domestic franchise with a particular emphasis on retail banking, its sound performance, good management and infrastructure, and a satisfactory capital position.

However according to the rating agency, the bank's FSR is constrained by its high reliance on the difficult Indian operating environment which is characterised by a general slowdown accompanied by a high level of credit risk.

"However the non performing loans problem that ICICI has brought to the merged entity is an additional burden on the balance sheet although accelerated provisions should ease the pressure on the FSR. The outlook for the FSR is stable," said Moody's.

The bank's deposit ratings have been placed at the country ceiling for foreign currency deposits in India set at 'Ba3/Not prime'. They are taken into consideration the bank's intrinsic financial condition, its large size and importance to the economy, said Moody's.

It added that an FSR of 'D+' would normally lead to a deposit rating of at least two notches higher in an unconstrained environment. The outlook for the bank's deposit ratings is stable.

The senior and subordinate debt ratings of the bank has been placed at Ba1, one notch above the country's debt rating ratings of Ba2.

ICICI had pierced the country ceiling for foreign currency bonds in January 2002. Moody's said that it continues to believe that there is relatively low risk that ICICI Bank's foreign currency obligations may be affected by any general moratorium imposed by the government.

According to the agency, the FSR should benefit from an overall improvement in the bank's funding profile, which is expected to be enhanced with the mobilisation of lower cost deposits and from an increased proportion of business stemming from the less risky and more profitable retail sector.

It also added that the merged entity is likely to have an improved credit risk profile by speeding up the process of business diversification, although this would not immediately lead to any change in the ratings.

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