Credit Rating

Federal Bank Receives First-Ever Investment-Grade International Credit Rating from S&P Global

NSE

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BSE

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Federal Bank has received its first-ever international issuer credit rating from S&P Global Ratings, marking a significant milestone in its 95-year history. S&P assigned the Bank a ‘BBB-’ Long-Term Issuer Credit Rating, ‘A-3’ Short-Term Issuer Credit Rating, with a Stable Outlook, making Federal Bank one of the select Indian private sector banks to hold an investment-grade international rating.

PRICE-SENSITIVE TRIGGER

Event: Assignment of First-Ever International Issuer Credit Rating by S&P Global Ratings

Type: Credit Rating

Impact: Positive

Immediate Effect: The investment-grade rating enhances Federal Bank’s global credibility, broadens access to international debt markets, and strengthens its appeal among global institutional investors.

Financials:

Key Metrics:

Long-Term Issuer Credit Rating: BBB- (Investment Grade)
Short-Term Issuer Credit Rating: A-3
Rating Outlook: Stable
Rating Agency: S&P Global Ratings
Rating Type: First-Time International Issuer Credit Rating
Capital Outlook: S&P expects the Bank’s Risk-Adjusted Capital (RAC) ratio to remain above 10% over the next two years.
Expected Loan Growth: 14%–16% over the next two years.
Forecast Return on Average Assets (ROAA): 1.3%–1.4% by FY2028.
Projected Gross Non-Performing Loan (GNPL) Ratio: 1.7%–1.9% over the next two years.
Expected Credit Cost: 0.7%–0.8% of total loans.
Core Deposits: Approximately 90% of total funding base.
Retail Deposits: Around 87% of total deposits.
Non-Resident (NRI) Deposits: Around 33% of total deposits.
Estimated Share of India’s Inward Remittances: Approximately 20%.
Blackstone Investment: Funds agreed to acquire a 9.99% stake through preferential warrants worth about ₹6,200 crore, supporting future capital strength.

Highlight:

Federal Bank has achieved investment-grade international status (‘BBB-’) from S&P Global, significantly improving its access to global funding and enhancing its international standing.

What Happened ?

Federal Bank informed the stock exchanges that S&P Global Ratings has assigned the Bank its first-ever international issuer credit ratings. The Bank received a ‘BBB-’ Long-Term Issuer Credit Rating, ‘A-3’ Short-Term Issuer Credit Rating, and a Stable Outlook.

According to the Bank, the rating marks a historic milestone, placing Federal Bank among a select group of Indian private sector banks with an investment-grade international issuer rating. The Bank believes the recognition validates its long-term transformation into a nationally competitive, digitally advanced institution while opening access to international debt capital markets and a broader global investor base.

Key details

Credit Rating Assignment:

S&P Global Ratings assigned Federal Bank:
- BBB- Long-Term Issuer Credit Rating
- A-3 Short-Term Issuer Credit Rating
- Stable Outlook
This is the Bank’s first-ever international issuer credit rating.

Strategic Significance:

The Bank highlighted that the investment-grade rating:

Expands access to international debt capital markets.
Enables participation in cross-border syndicated borrowings.
Improves eligibility among sovereign wealth funds, pension funds, insurance companies, and other institutional investors restricted to investment-grade securities.
Strengthens credibility with global counterparties and international lenders.
Supports long-term funding diversification.

S&P’s Assessment:

S&P stated that:

Federal Bank is expected to maintain strong capitalization over the next two years.
The Bank’s prudent lending strategy, stable asset quality, and retail deposit-led funding profile underpin its credit strength.
The Bank’s profitability is expected to improve as higher-yielding retail segments expand.
The Stable Outlook reflects expectations that the Bank will maintain its financial strength and capital position over the rating horizon.

Risk Analysis

Summary:

While the investment-grade rating strengthens Federal Bank’s funding profile and market perception, sustaining the rating will depend on maintaining capital adequacy, asset quality, and profitability.

Key Risks:

Faster-than-expected loan growth could reduce capital buffers.
Higher-than-anticipated credit losses may pressure profitability.
A decline in the Risk-Adjusted Capital (RAC) ratio below 10% could result in a rating downgrade.
Macroeconomic weakness or deterioration in asset quality may negatively affect future ratings.
The current rating carries a Stable outlook but remains subject to periodic review by S&P.

Worst Case:

S&P indicated the rating could be downgraded if capital weakens materially or profitability deteriorates because of significantly higher credit losses than currently expected.

Risk Level: Low

Company Commentary

Federal Bank stated that the rating:

Represents a historic milestone in the Bank’s 95-year history.
Validates its multi-year transformation into a nationally competitive and digitally advanced institution.
Opens access to international debt markets and global institutional capital.
Reinforces confidence among investors, counterparties, and NRI customers.

Official Exchange Filing: Federal Bank Limited

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