Moody’s Investor Service has affirmed the long-term local and foreign currency deposit ratings of IndusInd Bank at ‘Ba1’ and has revised its outlook to ‘stable’ from ‘negative’.
“Moody’s has also affirmed its baseline credit assessment (BCA) and adjusted BCA at Ba2,” it said in a statement on Monday.
Strong capital
The agency said the affirmation of the BCA and the deposit ratings takes into consideration the bank’s strong capital and core profitability, as well as a relatively modest funding.
“The change in outlook to stable from negative is driven by improvement in its funding and capital, and marginal asset quality deterioration because of the economic disruptions from the pandemic,” it further said.
The BCA and ratings of the private sector lender could be upgraded if there is a significant improvement in its funding, such that the share of sticky retail deposits in its funding and depositor concentration becomes comparable to that of other large-rated private sector banks in India, and credit costs normalise to pre-pandemic levels, said Moody’s.
It, however, warned that the bank’s BCA and ratings could be downgraded if there is a deterioration in its funding or asset quality, such that either NPL ratio or credit costs increase significantly from the current levels.
For the quarter ended December 31, 2020, IndusInd Bank reported a 34 per cent drop in its standalone net profit of ₹852.76 crore from ₹1,300.20 a year ago.
Moody’s, however, noted that despite the economic disruption, the asset quality deterioration was moderate. Gross and net non-performing loan (NPL) ratios, after including those benefiting from the Supreme Court order on loan classification, stood at 2.93 per cent and 0.22 per cent, respectively, as of the December-end 2020, compared to 2.18 per cent and 1.05 per cent, a year earlier.
IndusInd Bank also raised capital, resulting in a significant increase in the core equity tier 1 ratio to around 15 per cent from 12.1 per cent at the end of 2019, it further said.