State Bank of India

The stable outlook over the next 18 months reflects our expectation that SBI will sustain its market leadership in India's banking sector and will receive capital from the government, if needed. In our view, SBI's performance is better than the average of the Indian banking sector, but it is toward the weaker end of international peers. The bank's funding and liquidity will stay strong, supported by high customer confidence. A downgrade is unlikely based on our view of a very high likelihood of support from the government of India. We are unlikely to lower SBI's stand-alone credit profile over the next 18 months because the bank has sufficient capital buffer to absorb a spike in nonperforming loans and associated credit

...State Bank of India (SBI) will sustain its market leadership amid economic strain. SBI is the largest bank in India and has significant geographic and product diversity within the country. The bank's loan growth, asset quality, and profitability should improve as economic activity gains pace in India over the next two years. Although COVID-19 waves remain a key credit risk, we believe the bank will maintain its dominant market position. A strong deposit franchise should continue to support the bank's credit profile. SBI's funding and liquidity metrics are strong and the bank will potentially benefit from a "flight to quality" in a stress scenario. High customer confidence will underpin its solid retail deposit base. SBI's asset quality should improve gradually over the next 12-24 months. We forecast weak loans (nonperforming loans [NPLs] and restructured loans) will improve gradually from 6.6% of total loans as of end-September 2021. Credit costs are likely to moderate to 1.2%-1.3%, lower...

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