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.
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.