Icici Bank Ltd 6-K, filed Apr 6, 2020
Icici Bank Ltd (IBN)
About this 6-K
Icici Bank Ltd filed this 6-K on April 6, 2020.
FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of April, 2020
Commission File Number: 001-15002
ICICI Bank
Limited
(Translation of registrant’s name into English)
ICICI Bank Towers,
Bandra-Kurla Complex
Mumbai, India 400 051
(Address of principal executive office)
Indicate by check mark whether the registrant
files or will file
annual reports under cover Form 20-F or Form 40-F.
| Form 20-F X | Form 40-F |
Indicate by check mark if the registrant
is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(1):
| Yes | No X |
Indicate by check mark if the registrant
is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(7):
| Yes | No X |
Indicate by check mark whether by furnishing
the information
contained in this Form, the Registrant is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b)
under the Securities Exchange Act of 1934:
| Yes | No X |
If “Yes” is marked, indicate
below the file number assigned to the registrant in
connection with Rule 12g 3-2(b): Not Applicable
Table of Contents
| Item | |
|
1. |
Press Release dated on April 3, 2020. |
Item 1
Rating Action: Moody's takes rating actions on four Indian financial institutions
03 Apr 2020
Singapore, April 03, 2020 -- Moody's Investors Service ("Moody's") has affirmed the deposit ratings of ICICI Bank Limited ("ICICI") and Axis Bank Ltd ("Axis") at Baa3, and of IDBI Bank Ltd ("IDBI") at Ba2.
Moody's has also placed IndusInd Bank Limited's ("IndusInd") domestic and foreign currency issuer ratings of Baa3/P-3 under review for downgrade. The bank's ba1 baseline credit assessment (BCA) and adjusted BCA have also been placed under review for downgrade.
The baseline credit assessment (BCA) and adjusted BCA of ICICI and Axis are affirmed at ba1. The BCA and adjusted BCA of IDBI has also been affirmed at b2.
Moody's has also downgraded the counterparty risk assessments (CR assessments) of Axis and ICICI to Baa3(cr)/P-3(cr) from Baa2(cr)/P-2(cr), and the local currency counterparty risk rating (CRR) of Axis and ICICI to Baa3/P-3 from Baa2/P-2.
At the same time, the outlooks for ICICI and Axis are revised to negative from stable, and for IDBI to stable from positive.
Please click on this link https://www.moodys.com/viewresearchdoc.aspx?docid=PBC_ARFTL421957 for the List of Affected Credit Ratings. This list is an integral part of this Press Release and identifies each affected issuer.
RATINGS RATIONALE
The rapid and widening spread of the coronavirus outbreak deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The Indian financial system has been one of the sectors affected by the shock, especially given the already weakening operating environment. We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. Today's action reflects the impact on the four financial institutions listed above of the breadth and severity of the shock, and the deterioration in credit quality it may trigger.
CHANGE IN OUTLOOK ON ICICI, AXIS AND IDBI DRIVEN BY POTENTIAL DETERIORATION IN ASSET QUALITY
Moody's expects the economic shock, resulting from the nationwide lockdown will exacerbate existing negative pressure on asset quality from the already deteriorating operating environment prior to the outbreak. The Indian government announced a 21-day nationwide lockdown to slow the spread of the coronavirus on 25 March.
Given the limited liquidity buffers small and medium-sized enterprises (SMEs) maintain Moody's expects the quality of loans to these segments by ICICI and Axis will deteriorate. Additionally, the asset quality of retail loans, and in particular unsecured retail loans will deteriorate as borrowers' incomes are lost or reduced during the lockdown.
Large corporates are also not immune from the outbreak, with the outbreak having the potential to reverse the improving trend in credit metrics.
For IDBI, the incremental impact on asset quality will be cushioned by its very low new business origination over the last few years. However, its weaker underwriting increases asset quality risks in this environment.
AFFIRMATION OF BCA AND DEPOSIT RATINGS OF ICICI, AXIS AND IDBI REFLECTS STRONG BUFFERS
Both ICICI and Axis maintain strong capital, with a common equity tier 1 (CET1) ratio of 13.2% and 13.8% respectively at the end of December 2019. The two banks also have high core profitability, providing them with
capacity to absorb higher credit costs. Their funding has a high contribution from stable retail deposits and will remain resilient even in an environment of increased risk aversion. Given the above factors, there will have to be a significant deterioration in asset quality to erode these buffers.
IDBI's solvency has improved significantly over the last year, because of large capital infusions from its controlling shareholder, Life Insurance Corporation (LIC), and from the government of India (Baa2 negative). Its provision coverage ratio was 87% at the end of December 2019, one of the highest among rated Indian banks. And at 10.0%, the bank's CET1 ratio is consistent with its BCA of b2.
The bank's funding profile has also improved significantly, with the proportion of funding from retail deposits significantly increased. The bank's casa ratio was 48% at the end of December 2019, compared to 38% at the end of March 2018, while the share of bulk deposits declined to 17% from 33% over the same period.
DOWNGRADE OF CRR AND CRA OF ICICI AND AXIS REFLECTS LOWERED ASSUMPTION OF SUPPORT
Moody's has lowered its assumption of systemic support for ICICI and Axis to 'moderate' from 'high', resulting in a one-notch downgrade of their CRRs and CRAs. This change incorporates Moody's expectation, based on bailout of Yes Bank Limited (Caa1 Positive, ca), that government support for private sector banks will not be as forthcoming and timely as was being previously assumed.
In the case of Yes Bank, support was provided after the imposition of a moratorium on the bank, which is an event of default. This points to institutional constrains in providing timely support. In addition, the quantum of support extended was also not high as, even post the bailout, the bank's credit metrics remain weak.
Also, Moody's has assigned foreign currency CRR of Baa3/P-3 to ICICI and Axis and their respective subsidiaries wherever it was not previously assigned. The foreign currency CRR are at the same level as the local currency CRR of their respective subsidiaries as the risk profile of these obligations are similar. For ICICI Bank Limited, Bahrain Branch, Moody's has assigned foreign currency CRR of Ba2/NP, in line with the subsidiary's local currency CRR.
Moody's continues to assume a very high level of systemic support for IDBI, given its continued strong links with the government. This is reflected in its ownership structure, with the 100% government-owned LIC holding a 51% controlling stake, and the government of India holding 47%. The track record of large capital infusions from the government and LIC also support Moody's assumption of a very high level of support.
REVIEW FOR DOWNGRADE OF INDUSIND REFLECTS RISKS TO ASSET QUALITY
The review for downgrade of IndusInd's ratings reflects the downside risks to asset quality amid the deteriorating macroenvironment and financial market volatility.
The bank's loan portfolio includes a relatively higher proportion of micro finance and vehicle finance loans than its peers, which are at high risk of being negatively impacted by the economic shock as customers in these segments tend to have limited buffers to withstand economic stress.
IndusInd's funding is weak when compared to other rated Indian banks, as reflected by its high deposit concentration and low share of retail deposits. This weaker funding makes the bank more susceptible to the dislocations in the financial markets, including on wholesale funding sources.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS WHAT COULD CHANGE THE RATINGS UP ICICI, AXIS:
Given the negative outlook on ICICI and Axis, the ratings of these two banks are unlikely to be upgraded over the next 12-18 months.
The outlook could return to stable if asset quality remains steady despite the deteriorating macro environment, or if the impact from the coronavirus outbreak on the macro environment is not as severe as Moody's currently anticipates.
IDBI:
Moody's could upgrade IDBI's BCA if it improves profitability on a sustained basis, keeping credit costs at relatively low levels.
The final ratings could be upgraded if the bank's BCA is upgraded. INDUSIND:
Given the review for downgrade, Moody's is unlikely to upgrade the ratings over the next 12-18 months.
Moody's could confirm IndusInd's ratings if (1) high-quality retail deposits continue to grow at around the same rate at they were till the end of December 2019 and (2) leading indicators of asset quality remain stable.
WHAT COULD CHANGE THE RATINGS DOWN ICICI, AXIS:
The BCA could be downgraded if (1) there is a significant weakening in asset quality, with in turn negative implications on capital and profitability, and (2) there are indications of weakening funding, as reflected by the trend in retail deposits.
A downgrade of the BCA will lead to a downgrade of the final rating. Any indication of diminishing government support for the banks could also lead to a downgrade of their final ratings.
IDBI:
The BCA could be downgraded if asset quality further weakens, pushing the bank into making losses driven by higher credit costs.
A downgrade of the BCA will lead to a downgrade of the final rating. Any indication of diminishing government support for the banks could also lead to a downgrade of their final ratings.
INDUSIND:
IndusInd's BCA and Adjusted BCA could be downgraded if (1) there is no meaningful improvement in growth in stable sources of funding, (2) asset quality weakens, such that either NPL ratios or credit costs increase significantly from current levels, and (3) there is a reduction in profitability at the PPI level.
IndusInd's final ratings could be downgraded if (1) its BCA is downgraded, or if (2) the sovereign rating is downgraded.
The principal methodology used in these ratings was Banks Methodology published in November 2019 and available at https://www.moodys.com/research/Banks-Methodology--PBC_1147865. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
ICICI Bank Limited is headquartered in Mumbai, and reported total assets of INR 10.1 trillion at 31 December 2019.
Axis Bank Ltd is headquartered in Mumbai, and reported total assets of INR 8.2 trillion at 31 December 2019. IDBI Bank Ltd is headquartered in Mumbai, and reported total assets of INR 3.0 trillion at 31 December 2019. IndusInd Bank Limited is headquartered in Pune, and reported total assets of INR 3.1 trillion at 31 December 2019.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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.
The ratings have been disclosed to the rated entities or their designated agents and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569 .
At least one ESG consideration was material to the credit rating outcome announced and described above. The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates
outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322,
Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.
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
Client Service: 852 3551 3077
Graeme Knowd
MD - Banking
Financial Institutions Group
JOURNALISTS: 852 3758 1350
Client Service: 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
Client Service: 852 3551 3077
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.
CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY'S (COLLECTIVELY, "PUBLICATIONS") MAY INCLUDE SUCH CURRENT OPINIONS. MOODY'S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY'S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY'S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS ("ASSESSMENTS"), AND OTHER OPINIONS INCLUDED IN
MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS, ASSESSMENTS
AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.
MOODY'S CREDIT RATINGS , ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.
MOODY'S CREDIT RATINGS , ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.
All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary
measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.
To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY'S.
To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.
NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.
Moody's Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody's Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody's investors Service also maintain policies and procedures to address the independence of Moody's Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody's Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy."
Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.
Additional terms for Japan only: Moody's Japan K.K. ("MJKK") is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody's SF Japan K.K. ("MSFJ") is a wholly-owned credit rating agency subsidiary of
MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization ("NRSRO"). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.
MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as
applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.
MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorised.
For ICICI Bank Limited
| ||||
| Date: | April 3, 2020 | By: | /s/ Prashant Mistry | |
| Name : | Prashant Mistry | |||
| Title : | Chief Manager | |||