S&P ratings for ICICI Bank post-merger

Mumbai: Standard & Poors (S&P) has that it has assigned its BB long-term and B short-term rating to ICICI Bank following the final Reserve Bank of India (RBI) approval for its amalgamation with ICICI Ltd. S&P said the outlook is negative and the BB/negative/B ratings on ICICI Ltd have been withdrawn.

The RBI also has given ICICI Bank some concession with respect to compliance with priority-sector lending requirements and with the equity exposure ceiling of 5 per cent on advances, says Financial Services Ratings director Peter Sikora. The bank, however, will be required to adhere to all other regulatory requirements.

ICICI Bank has adopted fair valuation of ICICIs assets under the purchase method of accounting for mergers (under Indian GAAP), with the fair value review of the loan portfolio being completed by an external valuer.

Additional provisioning will be made to cover non-performing loans and restructured assets following completion of the fair valuation process. Additional provisioning against standard assets will also be raised as a precautionary measure, says Sikora.