US-based S&P Global affirms ICICI Bank’s ‘BBB-‘ rating on improved asset quality with a stable outlook

ICICI Bank will maintain its strong market position and market capitalisation over the next 12-18 months, S&P Global Ratings said on Monday, and affirmed its long-term issuer credit rating ‘BBB-‘ with a stable outlook.

Affirming ratings for ICICI Bank, global rating agency Standard and Poor’s (S&P) on Monday said the private sector lender is expected to sustain improvements in asset quality, backed by India’s economic recovery and improved risk management.

S&P has retained a ‘stable’ outlook on the rating reflecting the view that ICICI Bank will maintain its strong market position and good capitalisation over the next 12 to 18 months. It has ‘BBB-‘ long-term rating on the private lender.

This is despite an uneven economic recovery in the country and macroeconomic challenges.

In a statement, S&P Global Ratings said, “In our base case, the bank’s weak loans, defined as nonperforming loans (NPLs) and restructured loans, will decline to 3-3.5 per cent of total loans over the next 12 months, from about 4.6 per cent as of March 31, 2022.”

Broadly stable credit conditions will support this and credit costs should remain at about 1 per cent over the next 12-18 months, it said, adding the bank’s asset quality should remain better than the Indian sector average and in line with international peers over the next two years.

“The bank’s better customer profile and underwriting relative to the Indian banking sector will likely limit losses from the spillover impact of geopolitical tensions. Retail loans form about 53 per cent of the bank’s loan portfolio,” it stated.

These are well diversified among home loans, vehicle loans, and unsecured loans, including personal loans and credit cards. The stable outlook reflects that ICICI Bank will maintain a strong market position in the Indian banking sector.

The bank should maintain good capitalization over the next 12-18 months, supported by healthy earnings, it further said. An upgrade of ICICI Bank is unlikely over the next one to two years as an upgrade will require an improvement in the bank’s financial profile as well as the credit rating on the country.