Moody's Investors Service, the credit rating division of
), has reiterated certain ratings on three Indian banks, namely
Axis Bank Limited,
HDFC Bank Ltd.
ICICI Bank Ltd.
). Additionally, the rating agency has maintained its outlook
these banks at 'Stable.'
Moody's reaffirmed the senior unsecured debt and local currency
deposit ratings of Axis Bank, HDFC Bank and ICICI Bank at 'Baa2.'
Further, the rating agency reiterated each bank's financial
strength rating at 'D+,' which is similar to a baseline credit
assessment (BCA) of baa3.
Moody's ratings affirmations for Axis Bank, HDFC Bank and ICICI
Bank stem from these banks' relatively strong credit quality. The
aforementioned banks benefit from their significant presence in
the retail market, though exposure to the corporate sector
marginally offsets this.
Moreover, Moody's expects the sturdy profitability and balance
sheet position of HDFC Bank, Axis Bank and ICICI Bank to provide
additional support to asset quality metrics in the near term.
Further, due to compliance with stringent underwriting standards
by these banks, the credit quality in the retail segment did not
deteriorate even amid the slowdown in the Indian economy.
Notably, these banks had tightened their underwriting standards
after suffering losses during 2008-2010.
Moody's believes that growth in HDFC Bank, Axis Bank and ICICI
Bank are driven by mortgages and auto loans as well. Moreover,
though the economic growth weakened in India, demand for loans
has remained stable.
Given the diversity in operations, HDFC Bank, Axis Bank and ICICI
Bank are benefiting from lower non-performing loans (NPL) and
restructured loans as compared to public sector banks.
Furthermore, the banks have a strong capital position and
adequate internal capital levels to sustain additional capital
Moody's believes that the chance of ratings upgrade is minimal
until there is a revision to India's sovereign rating.
Nevertheless, a downward revision in ratings is possible if there
is a decline in earnings as well as internal capital generating
The affirmation of ratings by Moody's will enhance investors'
confidence in these banks. Further, chances of a rise in the
banks' funding cost are low going forward.
Currently, HDFC Bank and ICIC Bank carry a Zacks Rank #3 (Hold).
A better-performing foreign bank worth considering is
Deutsche Bank AG
), which has a Zacks Rank #1 (Strong Buy).
DEUTSCHE BK AG (DB): Free Stock Analysis
HDFC BANK LTD (HDB): Free Stock Analysis
ICICI BANK LTD (IBN): Free Stock Analysis
MOODYS CORP (MCO): Free Stock Analysis Report
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