Fitch affirms IB ratings on enhanced CD programme size

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Fitch Ratings has today affirmed the National Short-term 'F1+(ind)' rating of the certificates of deposit ("CD") programme of Indian Bank ("IB") for an enhanced programme size of INR25 billion (previously INR20bn). At the same time, IB's National Long-term rating is affirmed at 'AA(ind)', as is the 'AA(ind)' rating of its INR3bn subordinated debt programme, along with the bank's Support rating of '4'. The Outlook on all the ratings remains Stable.

 

The ratings continue to draw comfort from IB's improved performance during the last four years, which is consistent with that of most government banks and has been supported by the fairly benign credit environment during this period. Specifically, the bank's reported gross non-performing loan ("NPL") ratio improved to 2.6% at end-June 2006 compared to 18% at end-March 2002 on the back of write-offs, recoveries and lower NPLs from new business (including retail loans) through better loan monitoring. The risk management systems are being strengthened; this is important, since a key challenge is managing the relatively unseasoned retail loan portfolio, which had grown rapidly in recent years and accounted for about 26% of total loans at FY06.

 

The capital ratios increased following the infusion of equity by the government in FY02 and FY03 together with higher retained earnings, and the reported Tier 1 ratio was 10.3% at end-March 2006. The total capital adequacy ratio was 13.2%, which should enable IB to meet the capital charge for operational risk under Basel 2 and also plan for growth.

 

The Short-term rating is supported by IB's comfortable access to liquidity from the money market as well the strong franchise of the bank among retail depositors that ensure healthy renewals on deposit maturity.

 

IB's branch network is spread nationwide, although there is a higher concentration of its business and branches in Southern India, particularly in Tamil Nadu. The government owns 100% of the bank's share capital. 

 

Sourced From: Fitch Ratings