S&P Global Ratings has lowered its long-term issuer credit rating on Bank of India (BoI) to ‘BB+’ from ‘BBB-‘ because of continued pressure on asset quality, given the tough operating conditions for the corporate sector in India.
“We downgraded BoI because we expect the bank’s asset quality to remain weak over the next 12 months, following a recent deterioration,” S&P Global Ratings credit analyst Amit Pandey said in a statement.
“Accordingly, we lowered BoI’s stand-alone credit profile (SACP) to ‘bb’ from ‘bb+’,” it added.
The rating agency further said it has also lowered short-term rating on the bank to ‘B’ from ‘A-3’.
“BoI has sizable exposure to the infrastructure and metal sectors, which we view as having high risk. These sectors have come under stress in the current business cycle,” it said.
BoI’s Non Performing Loans (NPLs) had increased more than 100 per cent year-on-year by the end of March 2016, one of the highest among the peer banks.
S&P Global Ratings said the bank’s ratio of standard restructured loans to total loans is about 3.37 per cent as of March 31, 2016, which may also contribute to the slippages going forward.
Noting that BoI’s earnings will likely remain weak over the next 12-18 months largely because of high credit costs, the rating agency said the bank made a loss of Rs 62 billion in the last fiscal due to a substantial weakening in asset quality, moderate non-interest income, and high operating expenses.