Moody's Affirms HDFC Bank's Baa3 Deposit Ratings With Stable Outlook

Moody’s Ratings has affirmed HDFC Bank‘s Baa3 long-term deposit ratings and baa3 Baseline Credit Assessment (BCA), maintaining a stable outlook.

What Happened: The announcement was made by Moody’s Ratings on Tuesday. The decision to affirm the ratings of HDFC Bank is based on India’s favourable operating environment, which provides the bank with the opportunity to further strengthen its market position. “The bank’s diversified loan portfolio and above-industry-average profitability will support its internal capital generation and strong solvency,” the rating agency stated.

HDFC Bank’s strong retail franchise, access to low-cost deposits, and sufficient holdings of liquid government securities are expected to support its funding and liquidity. Despite a decline in profitability post-merger with parent company HDFC Limited, the bank’s profitability is expected to improve over the next few years.

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The bank’s asset quality is predicted to remain stable, supported by India’s healthy economic momentum, the bank’s diversified loan portfolio and strong risk management. HDFC Bank’s capitalisation, the highest among the Indian banks rated by Moody’s, is expected to provide a comfortable cushion against unexpected risks.

The agency also noted that HDFC Bank’s funding and liquidity will continue to be stable, with most of its funding coming from retail deposits. The bank’s substantial holdings of government securities will provide adequate liquidity buffers.

Moody’s assessment also considered the moderate probability of government support for HDFC Bank in the event of financial distress, given its status as India’s largest private-sector bank and its importance to the national payments system.

The banking giant is set to report earnings for the Q1 later this week.

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