S&P Global Ratings today said it has affirmed ‘BBB-‘ long-term rating on Indian Bank with a stable outlook on the back of the PSU lender’s strong capital base and funding ability.
“We affirmed the rating because we expect Indian Bank to maintain its above-average funding profile, strong liquidity, and adequate capitalisation and business franchise over the next 18-24 months,” S&P Global Ratings credit analyst Nikita Anand said.
However, the bank’s deteriorating asset quality owing to stress faced by its corporate borrowers could temper the above strengths of the bank, she added.
S&P Global Ratings has affirmed its ‘BBB-‘ long-term issuer credit ratings on Indian Bank. The outlook on the long-term rating is stable.
The US-based agency said it continues to see a very high likelihood that the government of India will continue to provide timely and sufficient extraordinary support to the bank.
“We expect Indian Bank to maintain its satisfactory domestic business franchise, and business and geographic diversification, which support our assessment of the bank’s business position,” Anand said.
Government currently holds 82.1 per cent stake in Indian Bank.
“We expect Indian Bank’s asset quality to remain stressed over the next 12-18 months due to asset concentration in corporate borrowers (52 per cent of loan portfolio),” Anand said.
The bank’s gross NPL ratio increased to 7 per cent as of June 30, 2016.
S&P, however, said it could lower assessment of Indian Bank’s stand-alone credit profile if the bank’s asset quality weakens significantly.
S&P Global Ratings does not rate Indian banks above the sovereign rating because of the direct and indirect influence the sovereign in distress would have on a bank’s operations, including its ability to service foreign currency obligations.
“Given the stable outlook on India, a change in the rating on Indian Bank is unlikely over the next 18-24 months,” S&P said.