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Fitch Ratings lowers outlook on Axis Bank, downgrades ICICI Bank

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Fitch Ratings lowers outlook on Axis Bank, downgrades ICICI Bank

Fitch Ratings lowered the outlook on India's Axis Bank Ltd. to negative from stable and downgraded the support rating and support rating floor of ICICI Bank Ltd. to "3" from "2" and to BB+ from BBB-, respectively.

The rating agency said June 15 that it affirmed the two banks' long- and short-term issuer default ratings at BBB- and F3, respectively. The lenders' viability ratings were affirmed at "bbb-," while Axis Bank's support rating and support rating floor were affirmed at "3" and BB+, respectively.

The outlook on ICICI Bank is stable.

The outlook revision on Axis Bank reflects the escalating pressure on its stand-alone profile on the back of heightened asset-quality stress and weak earnings. ICICI Bank's lower support rating and support rating floor take into account the sovereign's constrained finances and Fitch's belief that a large number of weak majority government-owned banks will have priority in terms of timeliness of government support, as opposed to private banks such as ICICI Bank.

Fitch said adverse findings in the investigation at ICICI Bank over loan impropriety could create reputational risk, particularly if they point at broader weaknesses in management.

Given its negative sector outlook on Indian banks, the rating agency expects internal capital generation for the sector to stay weak during the 2019 fiscal year.