Fitch affirms SBI, PNB, BoB ratings at ‘BBB-’ with negative outlook
1 min read 22 Nov 2021, 03:21 PM ISTThe ratings reflect Fitch expectations of a high probability of extraordinary state support for public sector banks, if required
PremiumFitch Ratings has affirmed ratings for various public sector banks including Bank of Baroda (BoB), State Bank of India (SBI) and Punjab National Bank (PNB) at 'BBB-' with the outlook being negative.
The operating environment OE outlook of Indian banks has been revised to stable from negative, reflecting a better recovery than Fitch expected in business and economic activity following the Covid-19 pandemic second wave.
Fitch said economic momentum and regulatory measures should support modest improvements in Indian banks' financial profiles over the next 12-24 months, even though challenges remain.
For BoB, Fitch said 'BBB-' reflects the ratings agency's expectations of a high probability of extraordinary state support for BOB, if required. "It is due to the bank's high systemic importance which stems from its large market share (over 6% of sector assets and deposits), its pan-India franchise and the state's 64% controlling ownership."
Fitch has given similar rating rationale for SBI and PNB.
The negative outlook on all the said Banks reflects the outlook on the Indian sovereign.
Fitch said PNB and BoB play an important role in furthering the state's objectives of social-lending and financial inclusion, which further underscores their importance.
Further, Fitch believes SBI's systemic importance also factors its somewhat broader policy role than peers, given its contribution in the rescue of YES Bank, and in implementing government relief measures through the pandemic.
On Monday, shares of PSBs are trading down, with SBI, BoB and PNB falling 3.33%, 5.66%, and 3.96% respectively in noon deals.
