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Rating Action:

Moody's affirms ICICI Bank's ratings

09 Mar 2016

Singapore, March 09, 2016 -- Moody's Investors Service has affirmed ICICI Bank Limited's local and foreign currency deposit ratings of Baa3/P-3.

The rating for the bank's senior unsecured medium term note (MTN) program of (P)Baa3 has also been affirmed.

In addition, Moody's has affirmed ICICI Bank's baseline credit assessment (BCA) and adjusted BCA of baa3, as well as its Counterparty Risk Assessment (CR Assessment) of Baa2(cr)/P-2(cr).

Moody's has also affirmed the ratings for the bank's subordinated MTN and junior subordinate MTN program at (P)Ba1 and (P)Ba2 respectively.

The outlook on all the long-term ratings, where applicable, is positive.

The full list of affected ratings is provided at the end of this press release.

RATINGS RATIONALE

ICICI Bank's non-performing loans (NPL) have increased over the last few quarters, with its gross NPL ratio standing at 4.21% at end-2015 compared to 3.29% at end-March 2015. The increase was particularly large in the latest quarter ending December 2015 as the bank recognized some accounts as NPLs, in response to the Reserve Bank of India's directives to banks operating in the country.

Moody's expects asset quality for ICICI Bank's corporate loans will remain under pressure, even beyond the quarter ending March 2016. The bank has a meaningful exposure to large corporates, some of which show weak debt servicing metrics. These exposures represent the key source of risk for the bank's asset quality.

At the same time, the bank has significant buffers to withstand a meaningful deterioration in asset quality.

ICICI Bank has seen significant improvement in its core operating profitability over the last few years, with its pre-provision income (PPI)/average assets increasing to 3.18% for the fiscal year ended 31 March 2015 (FY2015) from 1.91% at FY2009. The increase in its core profitability was driven by structural improvement in its funding profile, as well as higher net interest margins and better cost-to-income ratios.

As a result, even if NPLs increase sharply, the bank can rebuild its loan loss reserve levels over a reasonable period of time by providing for higher credit costs. Credit costs/PPI for the bank for the nine months to 31 December 2015 registered 28%, indicating that the bank has the capacity to support a much higher level of credit costs if required.

In addition, the bank exhibits strong capital levels, with a CET 1 ratio of 12.7% at end-2015. As demonstrated in the sale of its stake in its life insurance subsidiary — completed in 2015 — the bank can further support its capital levels by selling down some stakes in its subsidiaries if needed.

These strong buffers have led to the bank's BCA being affirmed at baa3, despite the pressure on its asset quality.

At the same time, ICICI Bank's BCA of baa3 is positioned at the upper end of the scorecard range of baa3-ba2, indicating downward pressure on its BCA.

WHAT COULD CHANGE THE RATINGS -- UP

ICICI Bank's senior unsecured debt and deposit ratings could be upgraded if India's sovereign rating of Baa3 — with a positive outlook — is upgraded.

WHAT COULD CHANGE THE RATINGS -- DOWN

ICICI Bank's BCA could face downward pressure if: (1) its NPL ratio increases substantially from current levels; and/or (2) if its core earnings fall and impacts its ability to support an increase in credit costs.

Both the BCA and the senior unsecured debt and deposit ratings could be downgraded if India's sovereign rating is downgraded.

The principal methodology used in these ratings was Banks published in January 2016. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.

ICICI Bank Limited, headquartered in Mumbai, reported total assets of INR7.02 trillion at 31 December 2015.

Taking into account Moody's actions on ICICI Bank's ratings, the bank's ratings are as follows:

ICICI Bank Limited:

• Long-term local and foreign currency bank deposit ratings affirmed at Baa3; outlook positive

• Short-term local and foreign currency bank deposit ratings affirmed at P-3

• Senior unsecured MTN program rating affirmed at (P)Baa3

• Subordinate MTN program rating affirmed at (P)Ba1

• Junior subordinate MTN program rating affirmed at (P)Ba2

• BCA and Adjusted BCA affirmed at baa3

• CR Assessment affirmed at Baa2(cr)/P-2(cr)

ICICI Bank Limited, New York Branch:

• Senior unsecured debt rating affirmed at Baa3; outlook positive

• Senior unsecured MTN program rating affirmed at (P)Baa3

• Subordinate MTN program rating affirmed at (P)Ba1

• Junior subordinate MTN program rating affirmed at (P)Ba2

• CR Assessment affirmed at Baa2(cr)/P-2(cr)

ICICI Bank Limited, Bahrain Branch:

• Senior unsecured debt rating affirmed at Baa3; outlook positive

• Senior unsecured MTN program rating affirmed at (P)Baa3

• Subordinate MTN program rating affirmed at (P)Ba1

• Junior subordinate debt rating affirmed at Ba2 (hyb)

• Junior subordinate MTN program rating affirmed at (P)Ba2

• Pref. stock non-cumulative rating affirmed at Ba3 (hyb)

• CR Assessment affirmed at Baa2(cr)/P-2(cr)

ICICI Bank Limited, Dubai Branch

• Senior unsecured debt rating affirmed at Baa3; outlook positive

• Senior unsecured MTN program rating affirmed at (P)Baa3

• Subordinate MTN program rating affirmed at (P)Ba1

• Junior subordinate MTN program rating affirmed at (P)Ba2

• CR Assessment affirmed at Baa2(cr)/P-2(cr)

ICICI Bank Limited, Hong Kong Branch

• Deposit note/CD program rating affirmed at (P)Baa3/(P)P-3

• Senior unsecured debt rating affirmed at Baa3; outlook positive

• Senior unsecured MTN program rating affirmed at (P)Baa3

• Subordinate MTN program rating affirmed at (P)Ba1

• Junior subordinate MTN program rating affirmed at (P)Ba2

• CR Assessment affirmed at Baa2(cr)/P-2(cr)

ICICI Bank Limited, Singapore Branch

• Senior unsecured debt rating affirmed at Baa3; outlook positive

• Senior unsecured MTN program rating affirmed at (P)Baa3

• Subordinate MTN program rating affirmed at (P)Ba1

• CR Assessment affirmed at Baa2(cr)/P-2(cr)

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Srikanth Vadlamani
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Stephen Long
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Moody's affirms ICICI Bank's ratings
No Related Data.
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