Govt banks to see rating revisions over bad loan woes: Icra

Credit profile of PSBs has worsened because of higher than anticipated stress, slower than expected pace of recovery and weak outlook for several credit intensive sectors. Higher level of stress is likely to significantly impact earnings and solvency profile of PSBs over the next 2-3 years, Icra said.
  • Language
  • App
  • Subscriptions
  • Specials
  • Sign-In
  • Register
GeStepAhead GrowMyMoney
moneycontrol.com

Home » News » Economy

Feb 21, 2016, 03.19 PM | Source: PTI

Govt banks to see rating revisions over bad loan woes: Icra

Credit profile of PSBs has worsened because of higher than anticipated stress, slower than expected pace of recovery and weak outlook for several credit intensive sectors. Higher level of stress is likely to significantly impact earnings and solvency profile of PSBs over the next 2-3 years, Icra said.

Like this story, share it with millions of investors on M3

Govt banks to see rating revisions over bad loan woes: Icra

Credit profile of PSBs has worsened because of higher than anticipated stress, slower than expected pace of recovery and weak outlook for several credit intensive sectors. Higher level of stress is likely to significantly impact earnings and solvency profile of PSBs over the next 2-3 years, Icra said.

Post Your Comments

Share Cancel

Govt banks to see rating revisions over bad loan woes: Icra
Facing higher than anticipated bad loan stress, public sector banks (PSBs) are likely to see some rating revisions in the next few days, Icra said.

Credit profile of PSBs has worsened because of higher than anticipated stress, slower than expected pace of recovery and weak outlook for several credit intensive sectors. Higher level of stress is likely to significantly impact earnings and solvency profile of PSBs over the next 2-3 years, Icra said.

Additionally, adverse capital markets conditions have reduced the prospects of mobilising capital from non- Government sources, while there has been no material success in mopping up capital via additional Tier I (AT1) instruments.

"All these factors contribute to deterioration in credit profile of the PSBs, which may get reflected in ratings outlook change announcements for some of them over the next few days," the rating outfit said.

In case of Oriental Bank of Commerce, the downgrade in rating was on account of higher than anticipated stress, slower than expected pace of recovery and weak outlook for several credit intensive sectors which led to sharp drop in asset quality indicators of the PSU lender.

Icra has revised the ratings on the Rs 2,000 crore basel III compliant tier 2 bonds of Oriental Bank of Commerce from AA+ (negative) to AA (stable). It has taken a similar action on other instruments of the bank.

On United Bank of India, it said "the revision in outlook reflects significant continued pressure on earnings and solvency due to deterioration in asset quality as well as limited visibility on capital availability to fully support credit growth while meeting regulatory minimum requirement." It reaffirmed the rating for lower tier II bonds programme aggregating to Rs 650 crore of UBI at A+.

The agency said continuation of timely support from the Government on the capital front would continue to remain a key driver for the ratings of PSBs. Sizeable net NPAs and other weak assets are likely to keep credit costs elevated over the next 2-3 years, leading to pressure on earnings.

Icra said in light of pressure on profitability and internal capital generation, even to maintain a credit growth of 10-12 percent per annum during FY16-FY19, PSBs would need to raise core tier I capital of Rs 1.6-2.4 trillion and AT1 capital of 1-1.1 trillion during FY16-FY19.

If Government restricts its capital infusion plan to Rs 0.7 trillion for FY16-FY19, several PSBs could face further pressure on their credit profile, it added.

Buy, Hold, Sell ? Hear it first on M3
Govt banks to see rating revisions over bad loan woes: Icra

See all

Get started using your favorite social network

or

Login using moneycontrol ID

Username
Password

Need help logging in? Reset password.

Don´t have an account? Sign Up

Get started using your favorite social network

or

Simply sign up using this short form

* mandatory

UserName*

Username should be atleast 4 character

Password*

Password should be 8 or more characters,
atleast 1 number, 1 symbol & 1 upper case letter

Alert

Your Password should contain
  • 8 or more characters
  • At least 1 number
  • At least 1 symbol
  • At least 1 upper case letter
Confirm Password*
Email
Already have an account? Login