Moody's affirms SBI, HDFC Bank ratings on strong asset quality

Moody's Ratings on Tuesday affirmed the ratings of State Bank of India (SBI) and HDFC Bank, with a stable outlook, on strong asset quality.

In two separate statements, Moody's Ratings said it has affirmed 'Baa3' long-term deposit ratings and 'baa3' Baseline Credit Assessment (BCA) and adjusted BCA of state-owned SBI and private sector HDFC Bank.

"SBI's ratings affirmation with a stable outlook reflects the bank's large and diversified lending portfolio with stable asset quality," it said, adding SBI's profitability is supported by its stable net interest margins, diversified non-interest income and low credit costs.


The ratings also incorporate SBI's dominant domestic franchise, which provides access to a large base of low-cost deposits, as well as its holdings of liquid government securities that support strong funding and liquidity, Moody's added.

"We expect SBI's asset quality to remain broadly stable, supported by resilient domestic demand and strong credit growth. However, some moderation is likely in select segments, including agriculture and Micro, Small and Medium Enterprise (MSME) lending, following rapid credit expansion, and credit costs are expected to increase modestly from historical lows," Moody's said.

The corporate sector remains healthy, with low leverage and strong profitability, which supports asset quality, Moody's added.

HDFC Bank's ratings affirmation with a stable outlook reflects the bank's strong and consistent asset quality, profitability and capital levels. HDFC Bank's profitability is supported by its strong net interest margins, diversified non-interest income and low credit costs, the US-based rating agency added.

"The ratings also incorporate the bank's strong retail franchise, which provides access to a large base of low-cost deposits, as well as its holdings of liquid government securities that support its funding and liquidity," Moody's said.

HDFC Bank's capital position is strong, Moody's said, adding the bank's capital is supported by internal capital generation and access to equity markets for capital needs.

"We expect HDFC Bank to maintain adequate capital buffers to support credit growth," it added.