Ratings agency CRISIL has downgraded the ratings on Allahabad Bank’s different debt instruments according to a press release issued by the agency dated February 16.
CRISIL has downgraded its ratings on Allahabad Bank’s lower tier-II bonds (under Basel II) and tier II Bonds (under Basel III) to ‘CRISIL AA/Negative’ from ‘CRISIL AA+/Negative’.
The ratings agency has also downgraded the tier-I perpetual bonds and upper tier-II bonds (hybrid instruments; under Basel II) to ‘CRISIL AA-/Negative’ from ‘CRISIL AA/Negative’. CRISIL has also assigned its ‘CRISIL A/Negative’ rating to the bank’s Rs1000 crore tier I bond issue (under Basel III).
CRISIL said the ratings downgrade reflects higher-than-expected deterioration in Allahabad Bank’s asset quality and profitability during the first nine months of fiscal year 2016. The ratings agency said it believes the bank’s asset quality will remain under pressure over the next few quarters, because of the asset quality review exercise and will result in increased pressure on the bank’s already weak profitability.
“The ratings, nevertheless, continue to factor in CRISIL’s belief that Allahabad bank will continue to receive support from its majority owner, the Government of India (GoI), both on an ongoing basis and in the event of distress, and will maintain adequate capitalisation and adequate resource profile,” CRISIL said.