Credit Assignment - State - Bank - of - India
Credit Assignment - State - Bank - of - India
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Tier-II bonds under Basel-III are characterised by a ‘point of non-viability’ (PONV) trigger due to which the investor may suffer a loss of principal.
The PONV will be determined by the Reserve Bank of India (RBI) and is a point at which the bank may no longer remain a going concern on its
own unless appropriate measures are taken to revive its operations, and thus, enable it to continue as a going concern. In addition, the difficulties
faced by a bank should be such that these are likely to result in financial losses and raising the Common Equity Tier-I (CET I) capital of the bank
should be considered the most appropriate way to prevent the bank from turning non-viable.
#
CARE Ratings Limited (CARE Ratings) has rated the aforementioned Basel-III compliant additional Tier-I bonds after taking into consideration
the following key features:
• The bank has full discretion, at all times, to cancel the coupon payments. The coupon is to be paid out of the current year’s profits. However,
if the current year’s profits are not sufficient, ie, the payment of such coupon is likely to result in losses during the current year, the balance
of the coupon payment may be made out of the revenue reserves, including statutory reserves and/or credit balance in profit and loss
account and excluding share premium, revaluation reserve, foreign currency translation reserve, investment reserve, and reserves created
on amalgamation, provided the bank meets the minimum regulatory requirements for CET I, Tier-I and total capital ratios, and capital buffer
frameworks as prescribed by the RBI.
• The instrument may be written down upon CET I breaching the pre-specified trigger of 5.5% before March 31, 2019, 6.125% on and after
March 31, 2019, and 7% on or after October 01, 2021, or written off/converted into common equity shares on the occurrence of the trigger
event called PONV. The PONV trigger will be determined by the RBI.
Any delay in the payment of interest or principal (as the case may be) due to invocation of any of the features mentioned above will constitute
an event of default as per CARE Ratings’ definition of default, and as such these instruments may exhibit somewhat sharper migration of the
rating compared with other subordinated debt instruments.
The ratings continue to derive strength from SBI’s strong and established franchise through an extensive pan-India branch
network and international presence, which has helped the bank develop a strong current account savings account (CASA) base,
and the diversified advances profile with a growing share of retail advances.
The ratings further factor in the consistent improvement in SBI’s asset quality parameters over the last three years with lower
slippages considering the stress induced due to COVID-19. As a result, the moderation in credit cost has helped the earnings
profile and improved the profitability of the bank. The capitalisation levels of the bank remain adequate and are likely to be
supported by internal accruals over the medium term.
1
Complete definition of the ratings assigned are available at www.careedge.in and other CARE Ratings Ltd.’s publications
Analytical approach
The ratings are based on the standalone profile of the bank and factor in the support from the GoI, which holds the majority
shareholding in the bank.
Outlook: Stable
The ‘stable’ outlook reflects CARE Ratings’ expectation that SBI will continue to maintain its steady growth in advances, deposits,
and a healthy profitability profile over the medium term, while maintaining stable asset quality and comfortable capitalisation
levels.
Strong franchise with extensive branch network and strong depositor base
The bank had a network of 22,405 branches (235 foreign offices), 76,089 business correspondence outlets, 65,627 ATMs/
automated deposit and withdrawal machines (ADWMs), and a customer base of over 48 crore as on March 31, 2023. The resource
profile of the bank continues to be healthy, with the bank having a robust CASA proportion of 42.88% as on June 30, 2023, and
strong retail liabilities franchise. During FY23 (FY refers to the period from April 1 to March 31), the total deposits of the bank
grew at 9% from ₹4,051,534 crore as on March 31, 2022, to ₹4,423,778 crore as on March 31, 2023. The CASA deposits grew
slower, in line with the industry trend, at 5% over the previous year. As a result, the CASA ratio fell to 42.67% as on March 31,
2023, as compared to 44.52% for the corresponding date of the previous year (domestic CASA – March 31, 2022: 45.28%; March
31, 2023: 43.80%; June 30, 2023: 42.88%). The cost of deposits also increased due to the increased proportion of bulk term
deposits and systemic interest rate hikes.
The bank been raising non-core capital and has raised Tier-II bonds of ₹4,000 crore and ATI bonds of ₹15,133 crore during FY23
to support its capitalisation levels. It has an enabling board approval to raise funds up to ₹50,000 crore, including ATI and Tier-
II bonds for FY24, which will help it fund its growth. While the overall capitalisation level is adequate, the strong internal capital
generation going forward, is expected to support the capitalisation levels of the bank over the medium term. While the strong
internal accruals will help the bank fund growth in the near term, considering the size of the bank, CARE Ratings expects the
bank to raise core equity in the medium term to support the continued credit growth.
Improvement in profitability
The interest income increased by 21% in FY23 as compared to the previous year due to the growth in advances book and the
rise in advance yields. However, non-interest income declined by 10% y-o-y due to treasury loss in FY23 on account of the
significant rise in interest rates. The fee-based income increased by 7% during FY23. The total income of the bank stood at
₹368,719 crore in FY23 as compared to ₹316,021 crore in FY22, registering a growth of 17%.
The yields-on-advances improved in FY23 due to a significant rise in interest rates, whereas the bank was able to control the rise
in the cost of deposits, resulting in an increase in the net interest income (NII) by 20% to ₹144,841 crore in FY23 as against
₹120,708 crore in FY22. The bank’s net interest margin (NIM) expanded to 2.78% for FY23 vis-à-vis 2.55% for FY22. The
operating expenses to total assets increased to 1.87% of the average total assets in FY23 as compared to 1.82% (excluding
exceptional item) for the previous year. The cost-to-income ratio of the bank also increased marginally to 53.87% for FY23 (from
53.31%, excluding exceptional item of change in family pension rules for FY22) due to higher provisions on account of wage hike
negotiations.
The bank’s pre-provision operating profit (PPOP) increased by 23% to ₹83,713 crore for FY23 from ₹67,874 crore for FY22. Credit
cost (provisions and write-offs/average assets) reduced by 32% due to lower incremental slippages requiring less provisions, and
therefore, the credit cost also reduced from 0.52% in FY22 to 0.32% in FY23. As a result, the bank’s net profit also rose to
₹50,232 crore with a return on total assets (ROTA) of 0.96% for FY23 from ₹31,676 crore for FY22 with a ROTA of 0.67%.
SBI reported a net profit of ₹16,884 crore for Q1FY24 on a total income of ₹108,039 crore as against a net profit of ₹6,068 crore
on a total income of ₹74,989 crore for the corresponding quarter the previous year (improvement is on account of the rise in
interest rates and advances book growth, also other income during Q1FY23 was impacted due to treasury loss). SBI reported a
ROTA of 1.23% (annualised) for Q1FY24 vs. 0.49% (annualised) for Q1FY23. CARE Ratings expects the bank’s credit costs to
remain moderate.
Key weakness
Moderate but improving asset quality
The bank has seen improvement in its asset quality parameters with a reduction in the gross non-performing assets (GNPA) and
NNPA over the years, due to lower slippages, continued write-offs, and recoveries. The bank has written-off NPAs of ₹189,461
crore and recoveries of ₹87,603 crore during the last four years (FY20 to FY23) as against fresh slippages of ₹169,582 crore
during the same period. The additions to the GNPA have been reducing each year, with the slippages’ ratio falling from 2.57%
for FY20 to 0.71% for FY23 (Q1FY24: 0.99%). The GNPA ratio and NNPA ratio improved to 2.78% and 0.67%, respectively, as
on March 31, 2023 (June 30, 2023: 2.76% and 0.71%) as against highs of 7.53% and 3.01%, respectively, as on March 31, 2019
(March 31, 2022: 3.97% and 1.02%). The agriculture segment had the highest NPA at 11.47% (June 30, 2023: 11.28%), followed
by MSME at 4.76% (June 30, 2023: 4.77%), and corporate at 3.55% (June 30, 2023: 3.42%) as on March 31, 2023.
The net stressed assets (net NPA + standard restructured assets + security receipts)-to-net worth have fallen from 26.66% as
on March 31, 2022, to 18.24% as on March 31, 2023 (June 30, 2023: 17.20%), respectively. SBI’s special mention accounts
(SMA), i.e., SMA 1 and SMA 2 (₹5 crore or more) stood low at 0.22% of the gross advances as on June 30, 2023. SBI continued
to carry higher provisions against the standard restructured book as on June 30, 2023. Going forward, the ability of the bank to
limit incremental slippages and maintain asset quality will be a key rating monitorable.
Liquidity: Strong
The bank’s liquidity profile is supported by its strong retail and sizeable deposit franchise. The bank had an excess statutory
liquidity ratio (SLR) of ₹400,000 crore as on June 30, 2023, which provides adequate liquidity. In addition, it has access to
borrowings from the RBI’s Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF) along with an option to
refinance from the Small Industries Development Bank of India (SIDBI), the National Housing bank (NHB), the National Bank for
Agriculture and Rural Development (NABARD), etc, and access to call money markets. The liquidity coverage ratio and net stable
funding ratio (NSFR) as on June 30, 2023, stood at 146.92% and 115.75%, respectively, as against the minimum regulatory
requirement of 100%. Furthermore, considering the stable franchise of the bank, SBI is expected to roll over its deposits.
Applicable criteria
Policy on default recognition
Factoring Linkages Government Support
Financial Ratios - Financial Sector
Rating Outlook and Credit Watch
Short Term Instruments
Rating Basel III - Hybrid Capital Instruments issued by Banks
Bank
SBI is the largest bank in India in terms of assets and total business and is systemically important with an asset base of ₹5,504,785
crore as on June 30, 2023. The bank has the largest market share in advances and deposits in the Indian banking system. As per
RBI’s press release dated January 02, 2023, the bank has been classified as one of the three D-SIB in India by the RBI and is
mandated to maintain an additional CET I capital of 0.60% of the risk weighted assets. The GoI is the major shareholder, holding
56.92% stake in the bank as on June 30, 2023. As on March 31, 2023, the bank had a network of over 22,405 domestic branches,
65,627 ATMs, and an international network of 235 offices across 29 countries.
Brief Financials (₹ crore) March 31, 2022 (A) March 31, 2023 (A) Q1FY24 (UA)
Total income 3,16,021 3,68,719 1,08,039
PAT 31,676 50,232 16,884
Total Assets# 49,57,972 54,78,688 55,04,785
Net NPA (%) 1.02 0.67 0.71
ROTA (%) 0.67 0.96 1.23
A: Audited UA: Unaudited; Note: ‘the above results are latest financial results available’
Note: All Analytical ratios are as per CARE Ratings’ calculations.
# Total Assets and Networth adjusted by DTA, revaluation reserve and intangible assets
Rating history for the last three years: Please refer Annexure-2
Covenants of the rated instruments/facilities: Detailed explanation of the covenants of the rated instruments/facilities is
given in Annexure-3
Date(s)
Name of the Date(s) Date(s) Date(s)
Sr. and
Instrument/Bank Amount and and and
No. Rating(s)
Facilities Type Outstanding Rating Rating(s) Rating(s) Rating(s)
assigned
(₹ crore) assigned in assigned in assigned in
in 2023-
2022-2023 2021-2022 2020-2021
2024
Bonds-Perpetual 1)Withdrawn
1 LT - - - - -
Bonds (06-Jul-20)
1)Withdrawn
2 Bonds-Upper Tier II LT - - - - -
(06-Jul-20)
Date(s)
Name of the Date(s) Date(s) Date(s)
Sr. and
Instrument/Bank Amount and and and
No. Rating(s)
Facilities Type Outstanding Rating Rating(s) Rating(s) Rating(s)
assigned
(₹ crore) assigned in assigned in assigned in
in 2023-
2022-2023 2021-2022 2020-2021
2024
Bonds-Perpetual 1)Withdrawn
3 LT - - - - -
Bonds (06-Jul-20)
Bonds-Perpetual 1)Withdrawn
4 LT - - - - -
Bonds (06-Jul-20)
1)CARE
AAA; Stable
1)CARE (12-Aug-20)
Bonds-Perpetual 1)Withdrawn
5 LT - - - AAA; Stable
Bonds (05-Jul-22)
(06-Jul-21) 2)CARE
AAA; Stable
(06-Jul-20)
1)CARE
AAA; Stable
(12-Aug-20)
1)Withdrawn
6 Bonds-Lower Tier II LT - - - -
(06-Jul-21)
2)CARE
AAA; Stable
(06-Jul-20)
Bonds-Perpetual 1)Withdrawn
7 LT - - - - -
Bonds (06-Jul-20)
Bonds-Perpetual 1)Withdrawn
8 LT - - - - -
Bonds (06-Jul-20)
1)CARE
AAA; Stable
(12-Aug-20)
1)Withdrawn
9 Bonds-Lower Tier II LT - - - -
(06-Jul-21)
2)CARE
AAA; Stable
(06-Jul-20)
1)CARE A1+
(13-Feb-23)
4)CARE A1+
(05-Jul-22)
1)CARE
AAA; Stable
1)CARE (12-Aug-20)
1)Withdrawn
11 Bonds-Upper Tier II LT - - - AAA; Stable
(05-Jul-22)
(06-Jul-21) 2)CARE
AAA; Stable
(06-Jul-20)
Date(s)
Name of the Date(s) Date(s) Date(s)
Sr. and
Instrument/Bank Amount and and and
No. Rating(s)
Facilities Type Outstanding Rating Rating(s) Rating(s) Rating(s)
assigned
(₹ crore) assigned in assigned in assigned in
in 2023-
2022-2023 2021-2022 2020-2021
2024
1)CARE
AAA; Stable
(13-Feb-23)
2)CARE 1)CARE
AAA; Stable AAA; Stable
CARE (07-Oct-22) 1)CARE (12-Aug-20)
12 Bonds-Tier II Bonds LT 2000.00 AAA; - AAA; Stable
Stable 3)CARE (06-Jul-21) 2)CARE
AAA; Stable AAA; Stable
(14-Sep-22) (06-Jul-20)
4)CARE
AAA; Stable
(05-Jul-22)
1)CARE
AAA; Stable
(13-Feb-23)
2)CARE 1)CARE
AAA; Stable AAA; Stable
CARE (07-Oct-22) 1)CARE (12-Aug-20)
13 Bonds-Tier II Bonds LT 500.00 AAA; - AAA; Stable
Stable 3)CARE (06-Jul-21) 2)CARE
AAA; Stable AAA; Stable
(14-Sep-22) (06-Jul-20)
4)CARE
AAA; Stable
(05-Jul-22)
1)CARE
AAA; Stable
(13-Feb-23)
2)CARE 1)CARE
AAA; Stable AAA; Stable
CARE (07-Oct-22) 1)CARE (12-Aug-20)
14 Bonds-Tier II Bonds LT 950.00 AAA; - AAA; Stable
Stable 3)CARE (06-Jul-21) 2)CARE
AAA; Stable AAA; Stable
(14-Sep-22) (06-Jul-20)
4)CARE
AAA; Stable
(05-Jul-22)
CARE 1)CARE 1)CARE 1)CARE
15 Bonds-Tier II Bonds LT 500.00 AAA; - AAA; Stable AAA; Stable AAA; Stable
Stable (13-Feb-23) (06-Jul-21) (12-Aug-20)
Date(s)
Name of the Date(s) Date(s) Date(s)
Sr. and
Instrument/Bank Amount and and and
No. Rating(s)
Facilities Type Outstanding Rating Rating(s) Rating(s) Rating(s)
assigned
(₹ crore) assigned in assigned in assigned in
in 2023-
2022-2023 2021-2022 2020-2021
2024
2)CARE 2)CARE
AAA; Stable AAA; Stable
(07-Oct-22) (06-Jul-20)
3)CARE
AAA; Stable
(14-Sep-22)
4)CARE
AAA; Stable
(05-Jul-22)
1)CARE
AAA; Stable
(12-Aug-20)
1)Withdrawn
16 Bonds-Tier II Bonds LT - - - -
(06-Jul-21)
2)CARE
AAA; Stable
(06-Jul-20)
1)CARE
AAA; Stable
(12-Aug-20)
1)Withdrawn
17 Bonds-Tier II Bonds LT - - - -
(06-Jul-21)
2)CARE
AAA; Stable
(06-Jul-20)
1)CARE
AAA; Stable
(12-Aug-20)
1)Withdrawn
18 Bonds-Tier II Bonds LT - - - -
(06-Jul-21)
2)CARE
AAA; Stable
(06-Jul-20)
1)CARE
AAA; Stable
(12-Aug-20)
1)Withdrawn
19 Bonds-Tier II Bonds LT - - - -
(06-Jul-21)
2)CARE
AAA; Stable
(06-Jul-20)
1)Withdrawn 1)CARE
(07-Oct-22) AAA; Stable
1)CARE (12-Aug-20)
20 Bonds-Tier II Bonds LT - - - 2)CARE AAA; Stable
AAA; Stable (06-Jul-21) 2)CARE
(14-Sep-22) AAA; Stable
(06-Jul-20)
Date(s)
Name of the Date(s) Date(s) Date(s)
Sr. and
Instrument/Bank Amount and and and
No. Rating(s)
Facilities Type Outstanding Rating Rating(s) Rating(s) Rating(s)
assigned
(₹ crore) assigned in assigned in assigned in
in 2023-
2022-2023 2021-2022 2020-2021
2024
3)CARE
AAA; Stable
(05-Jul-22)
1)CARE
AA+; Stable
1)CARE (12-Aug-20)
1)Withdrawn
21 Bonds-Tier I Bonds LT - - - AA+; Stable
(05-Jul-22)
(06-Jul-21) 2)CARE
AA+; Stable
(06-Jul-20)
1)CARE
AAA; Stable
(13-Feb-23)
2)CARE 1)CARE
AAA; Stable AAA; Stable
CARE (07-Oct-22) 1)CARE (12-Aug-20)
22 Bonds-Tier II Bonds LT 200.00 AAA; - AAA; Stable
Stable 3)CARE (06-Jul-21) 2)CARE
AAA; Stable AAA; Stable
(14-Sep-22) (06-Jul-20)
4)CARE
AAA; Stable
(05-Jul-22)
1)Withdrawn
(07-Oct-22)
1)CARE
AA+; Stable
2)CARE
1)CARE (12-Aug-20)
AA+; Stable
23 Bonds-Tier I Bonds LT - - - AA+; Stable
(14-Sep-22)
(06-Jul-21) 2)CARE
AA+; Stable
3)CARE
(06-Jul-20)
AA+; Stable
(05-Jul-22)
1)CARE
AAA; Stable
(13-Feb-23)
2)CARE
CARE 1)CARE 1)CARE
AAA; Stable
24 Bonds-Tier II Bonds LT 10000.00 AAA; - AAA; Stable AAA; Stable
(07-Oct-22)
Stable (06-Jul-21) (12-Aug-20)
3)CARE
AAA; Stable
(14-Sep-22)
Date(s)
Name of the Date(s) Date(s) Date(s)
Sr. and
Instrument/Bank Amount and and and
No. Rating(s)
Facilities Type Outstanding Rating Rating(s) Rating(s) Rating(s)
assigned
(₹ crore) assigned in assigned in assigned in
in 2023-
2022-2023 2021-2022 2020-2021
2024
4)CARE
AAA; Stable
(05-Jul-22)
1)CARE
AAA; Stable
(13-Feb-23)
CARE 2)CARE
Bonds-Tier II Bonds LT 4000.00 AAA; - AAA; Stable - -
25
Stable (07-Oct-22)
3)CARE
AAA; Stable
(14-Sep-22)
CARE 1)CARE
26 Bonds-Tier I Bonds LT 10000.00 AA+; - AA+; Stable - -
Stable (13-Feb-23)
*Long term/Short term.
Note on the complexity levels of the rated instruments: CARE Ratings has classified instruments rated by it on the basis
of complexity. Investors/market intermediaries/regulators or others are welcome to write to [email protected] for any
clarifications.
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Exchange Board of India, it has been acknowledged as an External Credit Assessment Institution by the RBI. With an equitable
position in the Indian capital market, CARE Ratings provides a wide array of credit rating services that help corporates raise capital
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Disclaimer:
The ratings issued by CARE Ratings are opinions on the likelihood of timely payment of the obligations under the rated instrument and are not recommendations to
sanction, renew, disburse, or recall the concerned bank facilities or to buy, sell, or hold any security. These ratings do not convey suitability or price for the investor.
The agency does not constitute an audit on the rated entity. CARE Ratings has based its ratings/outlook based on information obtained from reliable and credible
sources. CARE Ratings does not, however, guarantee the accuracy, adequacy, or completeness of any information and is not responsible for any errors or omissions
and the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE Ratings have paid a credit rating fee,
based on the amount and type of bank facilities/instruments. CARE Ratings or its subsidiaries/associates may also be involved with other commercial transactions with
the entity. In case of partnership/proprietary concerns, the rating/outlook assigned by CARE Ratings is, inter-alia, based on the capital deployed by the
partners/proprietors and the current financial strength of the firm. The ratings/outlook may change in case of withdrawal of capital, or the unsecured loans brought
in by the partners/proprietors in addition to the financial performance and other relevant factors. CARE Ratings is not responsible for any errors and states that it has
no financial liability whatsoever to the users of the ratings of CARE Ratings. The ratings of CARE Ratings do not factor in any rating-related trigger clauses as per the
terms of the facilities/instruments, which may involve acceleration of payments in case of rating downgrades. However, if any such clauses are introduced and
triggered, the ratings may see volatility and sharp downgrades.