SBI takes Moody's in its stride

about 30 days ago
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Moody’s Investors Service yesterday downgraded SBI’s Baseline Credit Assessment (BCA) or to put in in simple parlance, its overall standalone profile to ba2 from ba1 as the rating agency felt that the bank's asset quality and profitability will deteriorate.

It also downgraded SBI's foreign currency preferred stock non-cumulative MTN program rating to (P)B2 from (P)B1, and the rating of the preferred stock non-cumulative (Basel III compliant Additional Tier 1 securities) bond issued out of its DIFC branch to B2(hyb) from B1(hyb).

It however maintained long-term local and foreign currency deposit ratings of SBI at Baa3, pointing that deposit ratings of SBI are at the same level as India's Baa3 sovereign rating.

Moody’s said that prolonged financial stress among rural households, weak job creation and a credit crunch among non-bank financial companies will lead to a rise in non-performing loans, delaying the ongoing clean-up of bank's balance sheet over the past two years.

The stock opened at the same level at which it closed yesterday, at Rs.208 and then actually went up further to Rs.210 from where it dropped into the red to Rs.206. The market does not seem to give too much credence to the Moody’s downgrade.

The market is probably looking at the "buy" recommendation put out by Goldman Sachs and upped the target price to Rs.282.

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