Fitch Ratings has affirmed the long-term issuer default rating of (IDR) of State Bank of India (SBI) and Bank of Baroda (BoB) and its wholly-owned subsidiary BoB New Zealand Ltd at ‘BBB-’. The outlook on these ratings is ‘Stable’.
Fitch also affirmed SBI and BoB’s viability rating (VR) at ‘bb’ and ‘bb-’, respectively, and their Government Support Rating (GSR) at ‘bbb-’.
At the same time, the rating agency has affirmed BoB NZ’s shareholder support rating (SSR) at ‘bbb-’.
A ‘BBB’ IDR indicates that expectations of default risk are currently low. The capacity to pay financial commitments is considered adequate, but adverse business or economic conditions are more likely to impair this capacity.
A ‘bb’ VR bb’ denotes moderate prospects for ongoing viability. A moderate degree of fundamental financial strength exists, which would have to be eroded before the financial institution must rely on extraordinary support to avoid default. However, an elevated vulnerability exists to adverse changes in business or economic conditions over time.
A ‘bbb’ GSR denotes good prospects for ongoing viability. The financial institution’s fundamentals are adequate, such that there is a low risk that it would have to rely on extraordinary support to avoid default. However, adverse business or economic conditions are more likely to impair this capacity.
Fitch noted that the IDR and GSR of SBI and BoB are equated with India’s sovereign rating (BBB-/Stable).
In the case of SBI, the agency said this reflects the view that the bank has the highest probability of extraordinary state support among Indian banks if required.
This takes into consideration SBI’s market position as the country’s largest bank, the state’s 56.9 per cent controlling ownership, and its broader policy role than its peers.
In the case of BoB, the agency said this reflects the view that the bank has a high probability of extraordinary state support among Indian banks if required.
This accounts for BoB’s market position as the second largest state-owned bank, the State’s 64 per cent controlling ownership and Fitch’s assessment that the State has a strong propensity to support the banking system in general.
