Fitch Ratings upgraded AAA

28 Dec 2007 11:30

Axis Bank Limited28 December 2007 131, Maker Tower 'F', 13th Floor, Cuffe Parade, Colaba, Mumbai - 400005 Tel: 022 - 67074407 Press Release For Immediate Publication Axis Bank gets AAA National Long-Term Rating from Fitch Ratings Mumbai, December 14, 2007: Fitch Ratings has today upgraded Axis Bank Limited'sNational Long-term rating to 'AAA(ind)' from 'AA+(ind)'. At the same time, theagency has upgraded the Bank's Individual rating to 'C' from 'C/D' and Supportrating to '3' from '4'. The ratings of debt programmes have also been upgraded. • INR25 billion subordinated Lower Tier 2 debt programme to 'AAA(ind)' from 'AA+(ind)' • INR6.53bn subordinated Upper Tier 2 debt programme to 'AA+(ind)' from 'AA(ind)' • INR2.14bn perpetual Tier 1 debt programme to 'AA+(ind)' from 'AA(ind)' The upgrade of the Bank's National Long-term and Individual Ratings reflects theBank's diversity of income streams (including strong fee incomes), highproportion of stable 'current and savings account' (CASA) deposits and improvedasset quality ratios which are now amongst the best in the Indian bankingsystem. The issuance of INR45.3bn equity in July 2007 makes the Bank's capitalsize comparable to that of the larger government banks in India and shouldenable it to sustain its growth momentum, as well as absorb any deterioration inasset quality that may result from the increasingly challenging macroenvironment. Over the years, the Bank has established a pan-India branch networkand an increasing share of banking system assets, resulting in an upgrade of itsSupport rating. The Bank's business and risk management systems have benefited from the use oftechnology. Also, the growth in fee income (including that from its retailbanking activities and from its corporate debt syndication business) hasremained robust and its fee income/total operating income ratio (H108: 32.2%,FY07: 30.2%) has remained significantly higher than the median ratio for thesystem (12.3%). The strong fee income supports the Bank's return on assets,which remained above average (H108: 1.0%, FY07: 1.1%, FY07 systemic median:0.9%) in spite of the lower net interest margin (NIM, FY07: 2.9%). The Bank'sNIM has historically been constrained by its higher proportion of rate sensitivewholesale deposits. While the NIM has shot up to 3.3% for the quarter endedSeptember 2007 due to the equity infusion, which enabled the bank to(temporarily) retire high cost term deposits, the management expects a sustainedimprovement in spreads due to the strengthening of the Bank's retail termdeposit and CASA franchise. Underpinned by a buoyant economy, the Bank's loan portfolio expanded rapidly andits size has more than tripled during the last three years. While credit growthmay moderate somewhat due to the rise in interest rates, especially in theconsumer loan business, the growth in the corporate loan portfolio is expectedto remain strong. The rapid credit expansion has been accompanied byimprovements in risk management systems and the Bank's gross NPL ratio improvedto 1.1% at H108 (which is among the lowest for the system). While some pressureon future asset quality cannot be ruled out, the Bank's ability to absorb thesehas vastly improved following the recent equity infusion. Thus, while the Bank'sloan loss reserve coverage is low (H108: 42% of gross NPLs), it's net NPL/equityratio (FY07: 8.2%, systemic median: 9.7%) is expected to remain amongst the bestin the Indian banking system. Axis Bank is one of India's leading private sector banks and has a presence inSingapore, Hong Kong, Shanghai and Dubai, and seeks to expand further itsinternational presence. Axis Bank has the third largest ATM network in India; ithas the third largest base of debit cards in the country, and also has the thirdlargest EDC network. Axis Bank provides payroll services to over 12,000corporates across 3.2 million salary accounts. The market capitalisation of theBank as on December 13th 2007 was Rs. 346 billion; Axis Bank is the fifthlargest Bank by market capitalisation in India. For further information please contact: Mr. P MukherjeePresident, TreasuryAxis BankTel: +919821141624Email: p.mukherjee@axisbank.com This information is provided by RNS The company news service from the London Stock Exchange