The affected banks downplayed the rating action, saying this is in-line with the sovereign rating and does not in any new way negatively reflect their credit standing
Mumbai: Rating agency Moody's on Monday downgraded the standalone credit ratings of the country's three largest private sector lenders -ICICI Bank, HDFC Bank and Axis Bank -- to D+ from C- to align their individual ratings with that of the sovereign rating. As a result, the hybrid debt ratings of these banks, except HDFC Bank, will be negatively impacted, reports PTI.
The standalone bank financial strength rating (BFSR) of ICICI Bank, HDFC Bank and Axis Bank are revised down to D+ from C-, which now maps to a baseline credit assessment (BCA) of Baa3 from Baa2 on the long-term scale, Moody's Investors Service said in a statement issued in Singapore.
The agency also downgraded the hybrid ratings of Axis Bank and ICICI Bank to Ba3 from Ba2. But it said all the revised ratings carry stable outlooks.
"The rating action follows in the context of the ongoing global review affecting all banks whose standalone ratings are higher than the rating of the government where they are domiciled, and they conclude the review that was initiated on 30 April 2012," Moody's Investors Service vice-president and senior credit officer at financial institutions group, Beatrice Woo, said in the statement.
The affected banks downplayed the rating action, saying this is in-line with the sovereign rating and does not in any new way negatively reflect their credit standing.
Moody's also said the other ratings of these banks are unaffected and have stable outlooks as detailed below.
"Our review indicates that there are little reasons to believe that these banks will be insulated from a government debt crisis. More particularly, we note their significant direct exposure to the government securities, equivalent to 239% of tier 1 at Axis Bank, 226% of tier 1 at HDFC Bank and 143% of tier 1 capital at ICICI Bank (based on latest publicly available data).
"In addition, these banks are primarily domestic institutions with similar macroeconomic exposures as the sovereign government. Therefore, we view the lower standalone ratings -- which are now positioned at the rating of the government - as more appropriate to capture the credit profiles of the banks," Ms Woo said in the statement.
Explaining the rationale for the downgrade, Woo said, "The action reflects that their credit worthiness are highly correlated with that of the government's credit strength taking, into account (a) the extent to which their business depend on the domestic macroeconomic and financial environment, (b) the degree of reliance on market-based, and therefore more confidence-sensitive, funding and (c) their direct or indirect exposures to domestic sovereign debt, compared with their capital bases."
For all the banks, the key drivers for the rating action were (a) relatively low level of cross-border diversification of their operations, (b) high level of balance-sheet exposure to domestic sovereign debt, compared to their capital bases, (c) franchise resilience and intrinsic strength within the operating environment and (d) absence of ongoing support from foreign ownership.
She further said these rating actions derive from Moody's updated assessment of the linkage between the credit profiles of sovereigns and other institutions domiciled within the sovereign.
On the downward revision of Axis Bank and ICICI Bank's hybrid debt, she said, "Their adjusted BCA is in line with their respective BCA as no parental or cooperative support is imputed. Therefore, a lower BCA becomes the starting point for notching hybrid securities and results in lower hybrid ratings in both banks' cases."
The starting point for rating hybrid securities is the adjusted BCA, which reflects a bank's standalone credit strength as expressed through its BCA and includes uplift from parental and/or cooperative support, if applicable, but excludes systemic support, Moody's said.
As of March 2012, ICICI Bank had an asset base of Rs4.74 trillion, HDFC Bank had Rs3.4 trillion and Axis Bank Rs2.85 trillion.
Pricing is not the most important criterion for consumers when purchasing an insurance product. Brand of the provider, customer service and convenience hold greater importance compared to price
Mumbai: Consumers prefer the brand of the service provider, customer service and convenience over price while buying general insurance products, a survey by Ernst & Young (E&Y) said, reports PTI.
"Pricing is not the most important criterion for consumers when purchasing an insurance product. Brand of the provider, customer service and convenience hold greater importance compared to price," the survey said.
The E&Y survey, which covered over 24,000 life and non- life insurance customers across 23 countries about their buying practices with over 1,000 consumers in the country, however, said price sensitivity varies by segments and type of product.
It also pointed out that consumers are increasingly using online mode for research and buying a product.
"Consumers are increasingly moving online, (with) 31% of respondents use a range of online channels for research," it said, adding, however, sales activity lags research with only 11% customers actually making the purchase.
It also said despite higher use of the online channel, personal contact still remains important in purchase of insurance products.
"Customers are willing to purchase additional products from the same insurer as 69 per cent of the respondents saying they will do so, with convenience and better service being the primary drivers," the survey said.
It, however, said with portability provisions, more customers are likely to switch providers in the near future.
More and more card-holders have reduced the number of cards in their wallet and consolidated spending with a single card during 2011
Mumbai: The total number of credit card- holders in India declined to 21% in 2011, though the number of premium card-holders rose to 29%, reports PTI.
India also witnessed the fastest growth in the platinum card segment, to 29% in 2011 from 18% in 2010 on account of a rise in the mass affluent segment and the focused sourcing of customers with a higher income levels by the issuing banks, an HSBC Credit Card Monitor Survey said.
"This comes even as the country saw a 2% drop in the number of credit card-holders last year," HSBC India consumer assets head Manish Sinha said in the report.
"The role of benefits and rewards in attracting new and loyal customers is growing in importance," he said.
Significantly, the survey also finds that more and more card-holders have reduced the number of cards in their wallet and consolidated spending with a single card in 2011.
The proportion of single card-holders has grown most in India in 2011 at 90%. The second was the Philippines with 84%, followed by Malaysia (80%).
Interestingly, credit card offers are perceived differently across Asia. For instance, Indonesians rank worldwide card acceptance as the most important feature (50%), whereas only 2% of Hongkongers feel so.
Singapore registered the highest number of platinum card holders at 71%.
In Asia, Hong Kong had the highest penetration of credit cards in 2011 with 77% of the people polled saying they use credit cards.
The survey interviewed around 5,000 general card-holders, mostly in the 18-54 years age-group, in India, Hong Kong, Singapore, Taiwan, Malaysia, Australia, Indonesia and the Philippines during May-November 2011.