By Jindal Haria

India Ratings and Research (Ind-Ra) has affirmed Citibank, N.A. - India Branch's (Citi India) Short-Term Issuer Rating at 'IND A1+'. The agency has also affirmed Citi India's INR50bn short-term certificates of deposit programme and INR19.5bn short-term bank loan facility at 'IND A1+'.


KEY RATING DRIVERS

Same Legal Entity: Citi India's ratings reflect Citibank, N.A.’s (Citibank; Fitch Ratings Ltd Long-Term Issuer Default Rating: ‘A+’/Stable; Viability Rating: ‘a’) financial strength and Ind-Ra’s expectation of continued strong support from the latter, of which Citi India is a branch. Being a branch and part of the same legal entity as the bank, Citi India’s liabilities are those of Citibank.

Strong Profitability: Citi India maintained its return on average assets at 2.2% in FY16 (FY15: 2.4%) in spite of a marginal increase in its cost to income ratio to 35.9% (34.5%). Its net interest margin (FY16: 4.97%, FY15: 4.85%, FY14: 4.97%; FY13: 4.91%) remains among the highest in the Indian banking system, aided by the bank’s strong low cost deposit base and lending strategy.

Robust Funding, Comfortable Liquidity: Citi India has a strong funding profile, with low-cost current and savings account deposits constituting 49.5% of the total deposits at FYE16. The branch has a strong brand presence in India's metros and a dedicated clientele especially among high net-worth individuals, Indian nationals living overseas and in the form of global banking mandates from multinational corporations’ subsidiaries operating in India. Citi India has excess SLR (statutory liquidity ratio) investments of about INR250bn that could be used to manage an FCNR outflow of about INR120bn in 3QFY17. The branch has no short-term asset funding gap in spite of the impending FCNR outflows.

Adequate Capital Position: Citi India’s capital to risk weighted assets (FY16: 15.76%, FY15: 15.3%) and Tier 1 ratio (14.85%, 14.18%) in the agency’s opinion, is adequate to cushion it from any potential credit losses. That being said, Ind-Ra expects Citibank to inject equity into Citi India, if the India branch’s credit quality deteriorates markedly.

Consistent Asset Quality Improvement: Citi India’s asset quality has steadily improved since FY09, following the re-orientation of its portfolio towards large Indian corporates, multinational corporations’ Indian subsidiaries and secured retail loans. Although the gross non-performing loans increased marginally to 1.4% in FY16 from 1.3% in FY15 (FY14: 2.6%, FY12: 1.8%), Ind-Ra does not expect a substantial deterioration in the asset quality. The branch has also maintained a high provision coverage ratio (adjusted for technical write-offs) at 65% (Indian public sector banks – FY16: 35%-40%). Ind-Ra expects Citi India to maintain the past trends in asset quality due to its selective lending policy.


RATING SENSITIVITIES

The ratings could be downgraded if support from Citibank is deemed by Ind-Ra to have significantly weakened. A rating downgrade for Citibank below India’s sovereign ‘BBB-’ rating (by Fitch Ratings) would also lead to a rating downgrade for Citi India, although this is unlikely in the near term. 

 Citi India’s change of ownership structure, from a branch to a majority-owned subsidiary – if undertaken, is unlikely to impact its ratings, as Citibank is likely to hold the majority ownership of the newly formed subsidiary due to which support will remain strong.


COMPANY PROFILE

Citi India, which commenced operations in India in 1902, operates in both, corporate and retail segments and the  total loan book stood at INR 615bn in FY16.



SOLICITATION DISCLOSURES

Additional information is available at www.indiaratings.co.in.The issuer did not participate in the rating process, or provide additional information, beyond the issuer’s available public disclosure.

Ratings are not a recommendation or suggestion, directly or indirectly, to you or any other person, to buy, sell, make or hold any investment, loan or security or to undertake any investment strategy with respect to any investment, loan or security or any issuer.

DISCLAIMER

ALL CREDIT RATINGS ASSIGNED BY INDIA RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://WWW.INDIARATINGS.CO.IN/RATING-DEFINITIONS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE WWW.INDIARATINGS.CO.IN. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. INDIA RATINGS’ CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE.

Analyst Names

  • Primary Analyst

    Jindal Haria

    Director
    India Ratings and Research Pvt Ltd Wockhardt Towers, 4th floor, West Wing Plot C-2, G Block. Bandra Kurla Complex Bandra (East), Mumbai 400051
    +91 22 40001750

    Media Relation

    Mihir Mukherjee

    Manager Corporate Communications and Investor Relations
    +91 22 40356121