Comments
ICRA on Tuesday downgraded various debt instruments of IDBI Bank and said the instruments’ ratings are on watch with negative implications.
ICRA has downgraded the rating on IDBI Bank’s various instruments, whose outstanding values (as of March 2017) stand near ₹26,000 crore due to substantially weak operating and financial performance during year ended March.
ICRA has downgraded the ratings of the bank’s infrastructure bonds, flexi bonds and subordinated bonds to A from AA-. Instruments with ICRA-A are considered to have adequate degree of safety regarding timely servicing of financial obligations while ICRA-AA instruments have high degree of safety.
The sign of + (plus) or – (minus) may be appended to the rating symbols to indicate their relative position within the rating categories concerned. Thus, the rating of AA+ is one notch higher that AA, while AA– is one notch lower than AA.
The rating agency also downgraded Basel-III compliant Tier-2 bonds to A(hyb) from AA- (hyb).
Even though the bank reported a sharp increase in its NPA levels over the past three years, ICRA believes that the asset quality pressures are likely to remain high during FY2018. Asset quality pressures going forward will be driven by the large quantum of standard and standard restructured advances, including those under various schemes on resolution of stressed assets.
“With low provision cover against NPAs and expectations of further weakening of asset quality, the bank’s internal capital generation will remain weak over the medium term,” ICRA said.
The rating agency expects the bank to be constrained in meeting the increasing capital requirements under Basel-III.
Spate of downgradesLast week, India Ratings had downgraded IDBI Bank’s long-term issuer rating to AA from AA+, with negative outlook and earlier Crisil had cut its ratings on the bank’s Tier-II bonds, infrastructure bonds, to AA– from AA, and reaffirmed the negative outlook.
In February, S&P Global Ratings had downgraded the bank’s long-term foreign currency issuer credit rating to BB from BB+ on expectations of the bank’s asset quality remaining weak for the next 12 months.
On Tuesday, the shares of IDBI Bank were down 1.96 per cent at ₹64.90, on the NSE.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.