Axis Bank Limited (the Bank)


Download Axis Bank Limited (the Bank)


Preview text

AXIS/CO/CS/584/2021-22

January 25, 2022

The Chief Manager, Listing & Compliance Department National Stock Exchange of India Limited Exchange Plaza, 5th Floor Plot No. C/1, “G” Block Bandra-Kurla Complex Bandra (E), Mumbai – 400 051

The Senior General Manager – Listing Department BSE Limited 1st Floor, New Trading Ring, Rotunda Building P. J. Towers, Dalal Street Fort, Mumbai – 400 001

NSE Symbol: AXISBANK

BSE Scrip Code : 532215

Dear Sir(s),

Sub.: Rating action by S&P Global Ratings.

Ref.: Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations").

This is to inform you that credit rating agency S&P Global Ratings has revised the outlook on Axis Bank Limited (“the Bank”) to ‘positive’ from ‘stable’. At the same time, S&P Global Ratings has affirmed its 'BB+' long-term and 'B' short-term issuer credit ratings on the Bank.

S&P Global Ratings has also affirmed the 'BB+' long-term issue rating on the bank's outstanding debt.

The rating rationale letter of S&P Global Ratings received by the Bank today is attached herewith.

This is for your information and records.

Thanking You.

Yours sincerely,

For Axis Bank Limited Digitally signed by SANDEEP
SANDEEP PODDAR PODDAR Date: 2022.01.25
19:24:17 +05'30'
Sandeep Poddar Company Secretary Encl.: as above

AXIS BANK Legal & CS: Axis House, Wadia International Centre, Pandurang Budhkar marg, Worli, Mumbai 400 025 Registered Address: "Trishul" - 3rd Floor, Opp. Samartheswar Temple, Near Law Garden, Ellisbridge, Ahmedabad - 380006. Telephone No.: 079-26409322 Fax No.: 079-26409322 CIN : L65110GJ1993PLC020769 Website: www.axisbank.com

Research Update:
Axis Bank Outlook Revised To Positive On Improving Asset Quality; 'BB+/B' Ratings Affirmed Under Revised Criteria
January 25, 2022

Overview
- Axis Bank Ltd. is likely to sustain improvements in asset quality supported by an economic recovery and improved risk management.
- We revised our outlook on the India-based bank to positive from stable. At the same time, we affirmed our 'BB+' long-term and 'B' short-term issuer credit ratings on Axis Bank under our revised criteria. We also affirmed the 'BB+' long-term issue rating on the bank's outstanding debt.
- The positive outlook reflects a one-in-three chance that Axis Bank's asset quality metrics could be commensurate with higher-rated Indian and international peers over the next 12-18 months.
Rating Action
On Jan. 25, 2022, S&P Global Ratings revised the outlook on Axis Bank to positive from stable. At the same time, we affirmed our 'BB+' long-term and 'B' short-term issuer credit ratings on the bank. We also affirmed the 'BB+' long-term issue rating on the bank's outstanding debt.
The affirmation of our ratings on the bank follows a revision to our criteria for rating banks and nonbank financial institutions and for determining a Banking Industry Country Risk Assessment (BICRA) (see "Financial Institutions Rating Methodology" and "Banking Industry Country Risk Assessment Methodology And Assumptions" published on Dec. 9, 2021). The changes in criteria do not affect the rating.
Our assessments of Axis Bank's stand-alone credit profile (SACP) and the likelihood of extraordinary external support are unchanged under our revised criteria.

PRIMARY CREDIT ANALYST
Nikita Anand Singapore + 65 6216 1050 nikita.anand @spglobal.com
SECONDARY CONTACTS
Geeta Chugh Mumbai + 912233421910 geeta.chugh @spglobal.com
Amit Pandey Singapore + 65 6239 6344 amit.pandey @spglobal.com

www.spglobal.com/ratingsdirect

January 25, 2022 1

Research Update: Axis Bank Outlook Revised To Positive On Improving Asset Quality; 'BB+/B' Ratings Affirmed Under Revised Criteria

Rationale
The outlook revision reflects our view of a one-in-three chance that Axis Bank's asset quality could continue to improve such that the bank's credit costs and level of weak loans are commensurate with those of higher-rated Indian and international peers.
Axis Bank's loan growth, asset quality, and profitability should improve as economic activity gains pace in India over the next two years. Under our base-case scenario, we forecast the bank's weak loans, defined as nonperforming loans (NPLs) and restructured loans, will decline to 3.3%-3.5% over the next 12 months from about 3.8% of total loans as of Dec. 31, 2021, supported by stabilizing credit conditions. Credit costs will likely moderate to 1.3%-1.5%, lower than 2.3% in fiscal 2021 (year ended March 31, 2021), given the bank has accelerated provisioning on weak loans in recent quarters.
As of Dec. 31, 2021, Axis Bank had restructured a small 0.6% of its total loans, mainly from retail and corporate segments. Additionally, the bank has identified at-risk exposures (rated 'BB' and below plus restructured loans) of about 0.9% of loans. Some of these loans could become nonperforming, especially in sectors such as hotels and trading, which were hit hard by the pandemic. However, recoveries from existing NPLs should help offset the negative effect.
Since a change in senior management, Axis Bank has pursued calibrated growth, prudent provisioning and maintained adequate capital buffers. The bank's tighter risk management along with improving operating conditions in India should help sustain the decline in its credit costs and weak loans. If this trend persists, the bank's asset quality should remain better than the sector average in India. If the bank's weak loans and credit costs decline below our base-case forecasts, they could be comparable to international peers.
The bank's asset quality has historically been at the lower end when compared with international peers'. This reflects the severe corporate debt downturn that Indian banks faced in pre-pandemic years and Axis Bank's high exposure to stressed corporates. The bank's credit costs are declining given that legacy weak loans have been largely provided for, and pandemic-related weak loans have been manageable.
We expect Axis Bank to proactively recognize and provision for weak assets. Cumulative provisions covered about 2% of loans classified as standard as of Dec. 31, 2021. The bank has prudently boosted provision coverage on restructured loans with 100% provided for unsecured retail loans.
Our risk-adjusted capital (RAC) ratio estimate on the bank remains comfortable at 7.5%-8.5% over the next 12-18 months.
We see good growth prospects for the Indian economy over the next couple of years. However, a resurgence of COVID-19 cases remains a key risk to economic recovery. Barring major economic disruptions caused by COVID-19, the banking sector's asset quality should start improving gradually. By our estimates, the system's weak loans ratio has peaked, at close to 9% as of Sept. 30, 2021. That said, residual stress remains for the small to midsize enterprise (SME) and retail sectors, given that their recovery has been uneven, so far.
Outlook
The positive outlook reflects a one-in-three chance that Axis Bank can sustain the improvements in its asset quality over the next 12-18 months. The bank's strong market position and stable
www.spglobal.com/ratingsdirect

January 25, 2022 2

Research Update: Axis Bank Outlook Revised To Positive On Improving Asset Quality; 'BB+/B' Ratings Affirmed Under Revised Criteria
deposit base underpin its credit profile.
Upside scenario
We could raise our ratings on Axis Bank if the bank's asset quality improves sustainably such that it is commensurate with higher-rated Indian and international peers' over the next 12-18 months.
Downside scenario
We could revise the outlook to stable if the bank's asset quality deteriorates, reversing the improvements seen over the last few quarters. This could happen if the economic recovery in India derails, resulting in asset quality pain for the bank.
Ratings Score Snapshot
Issuer Credit Rating: BB+/Positive/B Stand-alone credit profile: bb+ Anchor: bb+ - Business Position: Strong (+1) - Capital and Earnings: Adequate (0) - Risk Position: Moderate (-1) - Funding and Liquidity: Adequate and adequate (0) - Comparable Rating Analysis: 0 Support: 0 - ALAC Support: 0 - GRE Support: 0 - Group Support: 0 - Sovereign Support: 0 Additional Factors: 0
ESG credit indicators: E-2, S-2, G-3
Related Criteria
- Criteria | Financial Institutions | Banks: Banking Industry Country Risk Assessment Methodology And Assumptions, Dec. 9, 2021
- Criteria | Financial Institutions | General: Financial Institutions Rating Methodology, Dec. 9, 2021
- General Criteria: Environmental, Social, And Governance Principles In Credit Ratings, Oct. 10,

www.spglobal.com/ratingsdirect

January 25, 2022 3

Research Update: Axis Bank Outlook Revised To Positive On Improving Asset Quality; 'BB+/B' Ratings Affirmed Under Revised Criteria

2021 - General Criteria: Group Rating Methodology, July 1, 2019 - General Criteria: Hybrid Capital: Methodology And Assumptions, July 1, 2019 - Criteria | Financial Institutions | General: Risk-Adjusted Capital Framework Methodology, July
20, 2017 - General Criteria: Methodology For Linking Long-Term And Short-Term Ratings, April 7, 2017 - General Criteria: Principles Of Credit Ratings, Feb. 16, 2011

Ratings List

Ratings Affirmed; Outlook Action

To

From

Axis Bank Ltd.

Issuer Credit Rating

BB+/Positive/B BB+/Stable/B

Ratings Affirmed

Axis Bank Ltd. (Dubai International Financial Centre Branch)

Senior Unsecured

BB+

Axis Bank Ltd. (GIFT City Branch)

Senior Unsecured

BB+

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.

www.spglobal.com/ratingsdirect

January 25, 2022 4

Research Update: Axis Bank Outlook Revised To Positive On Improving Asset Quality; 'BB+/B' Ratings Affirmed Under Revised Criteria

Copyright © 2022 by Standard & Poor’s Financial Services LLC. All rights reserved.
No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.
To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw or suspend such acknowledgment at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees.
STANDARD & POOR’S, S&P and RATINGSDIRECT are registered trademarks of Standard & Poor’s Financial Services LLC.

www.spglobal.com/ratingsdirect

January 25, 2022 5

Preparing to load PDF file. please wait...

0 of 0
100%
Axis Bank Limited (the Bank)