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Fitch Rates State Bank of India's USD600m Senior Debt Final 'BBB-'
April 4, 2017 / 6:41 AM / 8 months ago

Fitch Rates State Bank of India's USD600m Senior Debt Final 'BBB-'

(The following statement was released by the rating agency) SINGAPORE/MUMBAI, April 04 (Fitch) Fitch Ratings has assigned State Bank of India's (SBI, BBB-/Stable) USD600 million three-month LIBOR plus 0.95pp senior unsecured notes due April 2020 a final rating of 'BBB-'. This follows the completion of the securities issue and the receipt of final documents conforming to information previously received. The final rating is the same as the expected rating assigned on 29 March 2017. The notes constitute the issuer's direct, unconditional, unsubordinated and unsecured obligations and rank pari passu among themselves and SBI's all other unsubordinated and unsecured obligations. The notes were issued by SBI's London branch with a tenor of three years. KEY RATING DRIVERS - SENIOR DEBT The senior unsecured instruments are rated at the same level as the bank's Issuer Default Rating (IDR), in accordance with Fitch's criteria. SBI's IDR is driven by its Support Rating Floor of 'BBB-', which is at the same level as its Viability Rating of 'bbb-', implying that the bank's standalone credit strength also underpins the IDR. The Support Rating Floor reflects Fitch's expectation of a high probability of extraordinary support from the government of India (BBB-/Stable), if necessary, given the bank's very high systemic importance and quasi-sovereign status. SBI's core capitalisation should witness an improvement in the financial year ending-March 2017 (FY17). The bank received around 75% of the earmarked USD1.1 billion (around 5% of FY16 equity) in new capital from the government in January 2017. It also has plans to raise an additional USD2.2 billion directly from the market, for which it has received shareholder approval, although that maybe pushed out to FY18. The bank's non-performing loan (NPL) ratio of 7.2% at end-9MFY17 and stressed asset ratio of 9.5% were stable on a sequential basis and remain considerably lower than those of other large government banks. Absolute NPL growth has seen a sharp slowdown on a sequential basis since FY16. Loan growth was negatively affected owing to demonetisation during 3QFY17, but deposits swelled, with SBI's low-cost deposit ratio surging well above 45%. Credit costs remained a burden on earnings in 9MFY17, leading to net profit growth of -12%. This more than offset gains from treasury and 4% stake sale of SBI's life insurance subsidiary. SBI's merger with its five associate banks starting April 2017 will make its standalone assets account for nearly a one-fourth share of India's banking-system assets. RATING SENSITIVITIES - SENIOR DEBT SBI's Viability Ratting and Support Rating Floor are at the same level as its Issuer Default Rating (IDR), which would only be downgraded if both the Viability Rating and Support Rating Floor were downgraded. A downgrade of India's sovereign rating would also trigger a downgrade of the bank's IDR, as it is at the same level as the sovereign. Any change in the IDR will have a similar change on the notes' rating. SBI's other ratings are unchanged and are as follows: - Long-Term IDR at 'BBB-'; Outlook Stable - Short-Term IDR at 'F3' - Viability Rating at 'bbb-' - Support Rating at '2' - Support Rating Floor at 'BBB-' - USD10 billion medium-term note programme at 'BBB-' - USD4.05 billion senior unsecured notes at 'BBB-' - USD400 million perpetual Tier 1 bonds at 'B' For more details on State Bank of India's ratings and credit profile, see <a href="">State Bank of India, dated 4 August 2016. Contact: Primary Analyst Ambreesh Srivastava Senior Director +65 6796 7218 Fitch Ratings Singapore Pte Ltd. One Raffles Quay South Tower #22-11 Singapore Secondary Analyst Saswata Guha Director +91 22 4000 1741 Committee Chairperson Mark Young Managing Director +65 6796 7229 Date of the Relevant Rating Committee: 1 July 2016 Media Relations: Bindu Menon, Mumbai, Tel: +91 22 4000 1727, Email:; Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: Additional information is available on Applicable Criteria Global Bank Rating Criteria - Effective from 15 July 2016 to 25 November 2016 (pub. 15 Jul 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1021615 Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. 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