Debt downgrade by Moody’s unwarranted, says SBI

Arundhati Bhattacharya, MD and CFO of SBI.


 bl :MUMBAI, SEPT. 24: 2013

‘We have clarified to Moody’s that their concerns seem to be misplaced’

 

State Bank of India on Tuesday said Moody’s action in downgrading its senior secured debt and local currency deposit ratings was not warranted.

Moody’s downgraded SBI’s ratings a notch as its credit profile continues to face negative pressures in the context of economic slowdown and it is likely to seek another round of capital injection from the Government.

Arundhati Bhattacharya, MD and CFO, said: “We have clarified to them (Moody’s) that their concerns seem to be misplaced in view of the fact that we have more than sufficient capital to meet Basel III norms and also the current RBI and Board mandated norms.”

“Further, going forward, we also do not see any reason as to why we will run short of capital given the fact that the Government has always been supportive.”

In respect of banks such as SBI, which is the country’s banking champion, there really should not be a major difficulty in raising capital from the markets, should it need to do so, she added.

DEPOSIT BASE

In respect of the local currency bank deposit rating, which has been brought down by one notch, Bhattacharya said SBI has unparalleled deposit franchise.

In the last couple of years, SBI’s market share in deposits has gone up from 16.29 per cent to 16.73 per cent, indicating its strength in the area of resource mobilisation.

“As such we believe that in respect of local currency bank deposits we have absolutely no need for any kind of concern,” said the CFO.

OVERSEAS BORROWING

Hemant Contractor, MD (International Banking), observed that the downgrade is not going to impact SBI’s foreign currency borrowing programme.

“They (Moody’s) were the one’s who had given us a rating which was above the sovereign. The other rating agencies like S&P have maintained our rating at ‘BBB-’, which is the rating given to the Government of India.

“So, the market was always pricing our MTN bond issues based on the lower of the two ratings, which happens to be S&P’s rating. So, we do not expect any significant impact of Moody’s action on the pricing of our bonds,” said Contractor.

STRESSED ASSETS

In respect of the stressed assets showing a declining trend, Bhattacharya said while the bank might take several steps to bring them down, it will also depend on the broad economy.

SBI is lending only where there is enough strength in the particular borrowing unit.

“At this point in time, it is necessary to be a bit more selective in who we lend to. This is to ensure that slippages are kept to a minimum,” said the CFO.

Bhattacharya said: “If the broad economy is in stress and there is less of demand, then obviously that will impact the topline of the businesses which we have funded, which in turn might impact their quality.

“So, to a very large extent, this is also a function of the way the economy will perform.”