ICRA Reaffirms A1+ Rating on State Bank of Mysore's Certificate of Deposit

Strategic Insights -

State Bank of Mysore, an associate bank of State Bank of India, has maintained a strong credit profile according to ICRA. The rating agency has reaffirmed the A1+ rating on the bank's certificate of deposit programme, citing its strong parentage, operational and management synergies with State Bank of India, and a well-established franchise in Karnataka. The bank's franchise benefits from its association with State Bank of India, which enables access to low-cost CASA deposits. However, ICRA notes that SBM's moderate advances growth, high standard restructured advances, and low cushion to absorb stressed assets are factors that could impact its credit profile in the future.

Key Takeaways:

  • ICRA has reaffirmed the A1+ rating on State Bank of Mysore's certificate of deposit programme, citing its strong parentage and operational synergies with State Bank of India.
  • The bank's well-established franchise in Karnataka enables access to low-cost CASA deposits, accounting for 34% of its deposits as of March 2015.
  • SBM's total stressed exposures stood at 5.1% as of March 2015, with gross NPAs at 4.0% and standard restructured advances at 6.9% as of the same date.
  • The bank's capitalization profile remains adequate, with a CET 1 of 8.21% and CRAR of 11.42% as of March 2015.
  • ICRA estimates that SBM will require an additional 45-55% of its net worth in core capital from FY2016 to FY2019 to meet Basel-III norms and future business growth.
  • The bank's liquidity is expected to remain comfortable due to its healthy deposits profile and strong parentage.
  • SBM reported a net profit of INR 409 crore and an asset base of INR 78,898 crore as of March 31, 2015.

Statistics:

  • 5,000 crore (reduced from 9,000 crore) certificate of deposit programme.
  • Gross NPAs: 4.0% as of March 2015.
  • Net NPAs: 2.2% as of March 2015.
  • Total stressed exposures: 5.1% as of March 2015.
  • CET 1: 8.21% as of March 2015.
  • CRAR: 11.42% as of March 2015.
  • Capital requirement: 45-55% of net worth by FY2019.

Sources:

  • ICRA has reaffirmed the A1+ rating on the certificate of deposit programme of State Bank of Mysore (SBM/athe banka).
  • Source: ICRA Limited, [www.icra.in](http://www.icra.in), July 2015.