ICICI Bank and Axis Bank’s credit ratings have been upgraded by Moody’s Investors Service

The baseline credit assessments of ICICI Bank and Axis Bank have been improved by Moody’s Investors Service, showing improvements in credit fundamentals, particularly asset quality.

The baseline credit assessments of ICICI Bank and Axis Bank have been improved by Moody’s Investors Service, showing improvements in credit fundamentals, particularly asset quality.

The baseline credit assessments (BCAs) have been upgraded to baa3 from baa1 by the global rating agency.

The upgrade of the BCAs has no effect on deposit ratings, which are already at the same level as India’s sovereign rating (Baa3 stable), according to a statement released by Moody’s on Friday.

“Improvements in asset quality, capital, and profitability drove the upgrade of the two banks’ BCAs. Their asset quality has improved noticeably, with both gross and net non-performing loan (NPL) ratios falling.

“At the same time as provision coverage has expanded, credit costs have decreased.” “Higher profitability has resulted from lower loan costs,” it stated.

It added that for the year ending March 2022, ICICI Bank and Axis Bank’s return on assets were 1.8 percent and 1.2 percent, respectively, compared to an average of 0.8 percent and 0.4 percent for the four years ending March 2020.

The profitability of ICICI Bank has also benefited from improving net interest margins as the share of low margin overseas business has decreased in the last four years, according to the company.

Both institutions have increased equity capital, resulting in significantly better capital ratios, it said, noting that ICICI Bank and Axis Bank’s core equity tier 1 ratios at the end of March 2022 were 17.6% and 15.2%, respectively, compared to 13.6 percent and 11.3 percent at the end of March 2019.

However, it predicted that Axis Bank’s proposed acquisition of Citigroup Inc’s India consumer assets would result in a 230 basis point drop in the bank’s capital.

The ratings agency expects Axis Bank to raise capital to maintain its current capital ratios because the bank has adequate access to capital markets.

The deal is expected to be completed by March 2023, according to Axis Bank.