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Moody's, S&P also give clean chit

BS Reporter in Mumbai | October 13, 2008 09:27 IST
Last Updated: October 13, 2008 09:28 IST


ICICI Bank [Get Quote] received a much-needed boost with global rating agencies Moody's and Standard & Poor's saying the bank's overseas arms have no significant sub-prime risks.

"ICICI Bank's UK subsidiary has no high-risk sub-prime securities and enjoys robust asset quality and liquidity," Moody's said in its latest credit report.

Moody's reaffirmed its rating on ICICI Bank UK Plc with a "stable outlook" in its latest credit opinion, which was released after a sharp plunge of about 20 per cent in its parent's share price in Indian stock exchanges on Friday.

The agency retained the ICICI Bank UK rating at 'Baa1' for senior debt, which is higher than the foreign currency senior debt rating of any Indian bank [Get Quote].

"It has robust asset quality ratios with no loans classified as impaired," the rating agency has said. It has also stated that ICICI Bank UK maintains a rather conservative investment policy and does not hold any sub-prime assets, nor does it have exposure to CDOs, SIV/SIV Lites and leveraged loans.

"The mark-to-market impact in its investment book is not associated with any structured or high-risk sub-prime related securities but is due to the general widening of the credit spreads due to the global market conditions," the agency said.

It further asserted that ICICI UK has a relatively high level of capitalisation, with total capital adequacy at 19 per cent at March 31, 2008 and ICICI UK has a strong backing from its parent ICICI Bank Limited.

At the same time, S&P's senior director, financial institutions ratings, Asia, Ritesh Maheshwari, said in a statement that "credit fundamentals of ICICI Bank continue to remain sound despite the reports on its exposure to Lehman Brothers or the Bakerie group."

"These have to be seen in the context of the $10 billion capitalisation of the bank and $1 billion of profits, Maheshwari said, adding that while the overseas investment portfolio might be subject to mark-to-market valuation loss, it should not be significant enough to hurt ICICI Bank's credit profile.

The observations by the two rating agencies assume importance in the wake of reports that it was over-exposed to risk caused by the global meltdown and that the bank's loan profile was not fully secured and credible.

"The mark-to-market impact in its investment book is not associated with any structured or high-risk sub-prime related securities but is due to the general widening of the credit spreads due to the global market conditions," the agency said.

It further asserted that ICICI UK has a relatively high level of capitalisation, with total capital adequacy at 19 per cent at March 31, 2008 and ICICI UK has a strong backing from its parent ICICI Bank Limited.

At the same time, S&P's senior director, financial institutions ratings, Asia, Ritesh Maheshwari, said in a statement that "credit fundamentals of ICICI Bank continue to remain sound despite the reports on its exposure to Lehman Brothers or the Bakerie group."

"These have to be seen in the context of the $10 billion capitalisation of the bank and $1 billion of profits, Maheshwari said, adding that while the overseas investment portfolio might be subject to mark-to-market valuation loss, it should not be significant enough to hurt ICICI Bank's credit profile.

The observations by the two rating agencies assume importance in the wake of reports that it was over-exposed to risk caused by the global meltdown and that the bank's loan profile was not fully secured and credible.


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