Rating agency Icra on Monday downgraded the long-term ratings of state-run Oriental Bank of Commerce (OBC) to A+ from AA- on weak financial performances and high non-performing assets (NPAs).
Icra, the Indian subsidiary of global ratings agency Moody’s, downgraded the long-term rating of OBC’s Rs 3,000 crore Basel III compliant Tier II bonds to A+ from AA- and Rs 1,200 crore Basel II compliant lower tier II bonds to A+ from AA-. Further, it downgraded the long-term rating on OBC’s Rs 500-crore Basel II compliant upper Tier II bonds to A- from A+.
The outlook on all the ratings remains negative.
The rating downgrade factors in the bank’s weak financial performance as reflected in the elevated level of fresh slippages. “The high NPA level, significant losses and consequently weakened capital ratios. Given the expectation that the high level of slippages and elevated level of NPAs will continue in financial year (FY) 2019, the credit provisions are expected to remain significantly high in relation to the core operating profits (before treasury gains/losses and credit provisions),” Icra highlighted in the report.