Moody's Investors Service has today assigned a Baa2 rating to the US dollar-denominated senior unsecured fixed-rate bonds shortly to be issued by ICICI Bank Ltd ("ICICI Bank") through its Bahrain branch. The notes will not be registered under the United States Securities Act of 1933 and may not be offered or sold within the US (as defined in Regulation S under the Securities Act) except to qualified institutional buyers under Rule 144A and to non- US persons outside the US under Regulation S of the Act. ICICI Bank can exercise an optional redemption of the notes at any time. The exact amount of the issuance has yet to be decided.
The bonds will be governed by the laws of the State of New York and listed on the Singapore stock exchange. Their proceeds will be used by ICICI Bank for general corporate purpose in accordance with applicable rules and regulations. This debt issuance is rated at the same level as India's foreign currency debt ceiling of Baa2 with a stable outlook. The rating is subject to a review of the final documentation (offering memorandum) of this specific issue.
"The rating is derived from ICICI Bank's C- bank financial strength rating, which reflects the bank's stand-alone financial strength, which is mainly based on its strong domestic retail and corporate franchise as the second largest commercial bank in India," says Nondas Nicolaides, a Moody's Vice President -- Senior Analyst and lead analyst for the bank.
"The rating also reflects the bank's comfortable liquidity position, strong capitalisation levels, as well as its satisfactory recurring profitability driven by robust fee income comprising more than 34% of the bank's total income in the first six months of the fiscal year ending March 2010," adds Nicolaides.
In addition, the rating takes into consideration the asset quality challenge that ICICI Bank currently faces, given the growing trend in loan delinquencies in India as a result of the economic slowdown and the seasoning of the bank's retail loan book.
ICICI Bank's first-half results point to a 10.1% year-on-year growth in unconsolidated net profits. This comes mainly on the back of robust treasury income and expense control, as interest rates declined in India, and despite a 5.1% decrease in net interest income and a 29% decline in fee and commission income given the bank's consolidation phase registering a negative year-on-year growth of 14% in its net loans.
Moody's additionally notes the bank's negative year-on-year growth of 11.4% in total deposits as it endeavours to pare its high-cost wholesale deposits and increase the portion of its low-cost ("CASA") deposits. CASA deposits accounted for 36.9% of the bank's total deposits as of end-September 2009 compared to 30% one year previously. As a result, ICICI Bank managed to marginally improve its net interest margin to 2.5%.
The bank also registered a gross non-performing assets ratio of 4.7% and a capital adequacy ratio under Basel II of 17.7% (13.3% Tier 1) as at the end of September 2009.
The last rating action on ICICI Bank was taken on 21 October 2009 when the bank's A2/P-1 global local currency deposit ratings were downgraded to Baa2/P-2. At the same time, the bank's foreign currency subordinated (Lower Tier 2) and junior subordinated (Upper Tier 2) ratings of Baa2 were downgraded to Baa3, while its perpetual hybrid Tier 1 rating of Baa2 was downgraded to Ba1. These rating actions were triggered by Moody's reassessment of systemic support assumptions affecting all rated Indian banks.
The principal methodologies used in rating this issuer are "Bank Financial Strength Ratings: Global Methodology", and "Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology".
These can be found at www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab.
Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.
Headquartered in Mumbai, ICICI Bank Ltd reported total unconsolidated assets of INR3,664 billion (US$76 billion) at the end of September 2009.