S&P cuts Axis Bank rating on risks to banks

Says economy to fall into recession, asset quality to deteriorate, credit costs to rise

S&P Global Ratings on Friday downgraded Axis Bank’s rating to BBB- from BB+ saying the rating action reflected its view that economic risks had increased for banks operating in India.

“We have lowered our ratings on Axis to reflect our expectation that heightened economic risks facing India’s banking system will affect the bank’s asset quality and financial performance,” it said.

S&P said while Axis’s asset quality was superior to the Indian banking sector average, its level of non-performing assets (NPAs) will likely remain high compared with the international peers. The rating major has placed ratings of Indian Bank on ‘Credit Watch’ as it sees high risk that the public sector bank’s credit profile could weaken over the coming quarters due to COVID-19 as well as the merger with the weaker Allahabad Bank.

S&P expects the Indian economy to slip into recession in the current fiscal year and anticipate Indian banks’ asset quality to deteriorate, credit costs to rise, and profitability to decline over the next 12 months.

“We affirmed the ratings on the other banks we rate in India,” S&P added.

With inputs from The Hindu