Axis Bank Rated Negative By Fitch
By Joseph Samson
May 21, 2009
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Fitch Rating revised the National Long-term Rating at 'AAA(ind)' for Axis Bank Limited (ABL) to negative from stable. The support rating and individual rating for ABL stand at 3 and C respectively. Other rating include -

• 'AAA(ind) for INR35bn subordinated Lower Tier 2 debt programme
• 'AA+(ind) for INR6.53bn subordinated Upper Tier 2 debt programme.
• AA+(ind) for INR2.14bn perpetual Tier 1 debt programme'

The negative outlook is an indicator towards the bank's increased vulnerability to the present challenges in recessionary market. The rating has been based on the observation of fast growth in corporate lending during last two years. The bank's credit growth was just 17 per cent and 25 per cent as compared to the corporate lending grew 37 per cent and 62 per cent in FY09 and FY08 respectively. Fitch reckons that the repayment capability of Indian corporate house has been inversely impacted by the global slowdown and hence would pass on the effect to bank's portfolio.

Axis Bank is one of the new banks that started its operations in 1994. Its market capitalization is Rs. 359.00 crores with the public holding at 57.60%. Since 2008, ABL's "stressed assets" comprise 3.6% of gross loans (FYE09) compared to 1.9% (FYE08). The expiry of service term of ABL's Chairman and CEO also increases the challenge.

Fitch's national ratings are measure of creditworthiness for rated entities in different countries. These ratings are particularly used in countries with low international sovereign ratings, where there is fair demand for such ratings.

Fitch Ratings is a global rating agency, headquartered in New York and London and widely held by investors and creditors for its credibility, transparency and timeliness in data coverage. The agency operates 50 offices worldwide and is dedicated to serving needs of credit market with independent, objective credit opinions, research, and data.

In India, Fitch has been recognized by RBI, SEBI and National Housing Bank (NHB). Its offices are located at Mumbai, Delhi, Chennai and Kolkata. Fitch offers national ratings for local investment markets. An identifier such as 'AAA(ind)' for National ratings in India is attached to rating. Specific letter grades are not therefore internationally comparable. AAA is the highest credit rating, and other rating are done relative to this.


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