Axis Bank gets "S&P"ed!

S&P rating agency on Friday cut Axis Bank’s rating to BB+ from BBB-, with a stable outlook. Earlier, there was confusion that S&P had placed the Bank on credit watch but later, Axis Bank clarified that it was an editorial error and Bank is on stable outlook.

In the note put out by S&P, it said:

We lowered our ratings on Axis to reflect our expectation that heightened economic risks facing India's banking system will affect the bank's asset quality and financial performance. While Axis' asset quality is superior to the Indian banking sector average, its level of nonperforming assets (NPAs) will likely remain high compared to international peers'. Nevertheless, we expect the bank to maintain its strong market position and adequate capitalization. The stable outlook reflects our view that our ratings on Axis already factor in some deterioration in the bank's asset quality and performance over the next 12 months.

S&P said that it could lower the ratings on Axis if the bank's stressed assets rise significantly beyond the system average over the next few quarters. The rating could be raised if the bank's performance, particularly its asset quality, is significantly superior to that of domestic peers and commensurate with international peers' over the next 18 months.

The market is not happy with this downgrade in rating and the stock is in the red. Opening with a loss of over 2.5% at Rs.414.25, it went down to an intraday low at Rs.404.25, slipping down almost 5% an continues to trade currently at Rs.407 levels.