Global ratings agency Fitch Ratings affirmed the long-term issuer default ratings (IDRs) on Bank of Baroda (BoB) and its wholly-owned subsidiary, Bank of Baroda (New Zealand) Limited (BoB NZ), at 'BBB-'.
The agency, in a report, said that the outlook is stable and affirmed BoB's viability rating (VR) at 'bb-'.
“At the same time, we have also affirmed BOB's Government Support Rating (GSR) of 'bbb-' and BoB NZ's Shareholder Support Rating (SSR) of 'bbb-',” the agency said in a report.
The agency highlighted that BoB's IDR is support-driven with GSR is the same as India's sovereign rating (BBB-/Stable) and , above the VR.
“The stable outlook on the IDR mirrors that on the sovereign IDR,” the agency said.
Additionally, the agency in the report said that supporting operating environment, strong local reach, loan growth above peers, improving loan quality, sharply improved profitability, deposit funded are key rating drivers.
“BoB's common equity Tier 1 (CET1) ratio organically rose to 12.5 percent in the April-JuneFY24 quarter (including profits), by our estimate, from 12.2 percent at FY23,” the agency said.
On the factors that could individually or collectively lead to negative rating action or downgrade, the agency highlighted the weakening of government's ability to provide extraordinary support, reflected in negative action on India's sovereign ratings, would lead to action on the GSR and long-term IDR.
Additionally, the bank's VR is expected to be stable over the near to medium term, but it could be downgraded.
“If BoB's risk profile has increased to a point where it can pose potential risk in a less benign OE and become a more binding constraint on its improving but moderate loss-absorption buffers, negative ratings could be seen,” the agency said.
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