SBI's Proposed Debt Less Likely to Default at BBB Rating by Fitch

Fitch Ratings has assigned SBI's proposed debt instruments with a less default likelihood at BBB-(EXP) rating.

The debt instruments constitute direct, unconditional, unsubordinated and unsecured obligations of SBI.

Issue is expected to be of three year tenor and the notes are to be issued by SBI's London branch.

These instruments are rated at the same level of bank's Issuer Default Rating (IDR), Fitch Ratings said.

"SBI's IDR is driven by its support rating floor of BBB-, which is at same level as its viability rating of bbb-, implying bank's standalone credit strength also underpins the IDR," it said.

The support rating floor reflects Fitch's expectation of a high probability of extraordinary support from government (BBB-/Stable), if necessary, given bank's very high systemic importance and quasi-sovereign status, it further said.

SBI received around 75 per cent of the earmarked USD 1.1 billion in new capital from government in January and likely to get remaining share before end of current fiscal.

The lender plans to raise an additional USD 2.2 billion directly from market.

Although the money raise plan may be pushed out to 2017-18, Fitch said.

For fiscal ending tomorrow, Fitch Ratings expects that the core capitalisation of SBI should witness an improvement.

Country's largest lender is set to merge with five of its associate banks from April 1, after which bank's standalone assets will account for nearly a one-fourth share of India's banking-system assets.

A downgrade of India's sovereign rating would also trigger a downgrade of bank's IDR, it said, as it is at the same level as the sovereign, Fitch said.

"Any change in the IDR will have a similar change on the proposed notes' rating," the ratings agency said.