Fitch lowers Axis’ outlook, cuts ICICI’s support ratings

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MUMBAI, JUNE 15
Global ratings agency Fitch on Friday said ICICI Bank and Axis Bank have “gaps” in their risk control mechanisms and has revised down its outlook on the latter to negative on sour assets worries.
“Both the banks exhibit gaps in risk controls. An ongoing investigation at ICICI Bank on extending a loan with a potential conflict of interest has also focused authorities’ attention on the bank’s governance,” it said in a note.
The report also warns that adverse findings may create a “reputational risk”, especially if they point at broader weaknesses in management.
The agency cut its outlook on Axis Bank’s issuer default rating to negative from stable, pointing out to the high proportion of NPAs and the limited capital buffers available, despite a recent infusion.
It can be noted that a spike in NPAs and provisioning for the same have led the bank, which is searching for a new head after the board agreed to cut short Shikha Sharma’s tenure, to report its first ever quarterly loss in Q4 of FY18.
Commenting on ICICI Bank, the report said, “capital buffers are better even though it has experienced similar financial deterioration like Axis Bank in the previous few financial years.”
The agency also downgraded ICICI Bank’s ‘support rating’ to ‘3’, from ‘2’, apart from revising down its support rating floor to ‘BB+’, from ‘BBB-‘.
But the agency has affirmed the issuer default ratings and viability ratings of ICICI Bank and Axis Bank at ‘BBB-‘ and ‘bbb-‘, respectively.

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