Bank of Baroda share price slips 1.5% as Moody’s downgrades baseline credit ratings

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March 5, 2020 1:00 PM

Share price of Bank of Baroda slipped by 1.5 per cent on Thursday morning to trade at Rs 72.30 apiece after Global rating agency Moody’s Investor Service downgraded Bank of Baroda’s baseline credit assessment.

BoB’s gross non-performing assets for the third quarter of this fiscal stood at Rs 75,140 crore.

Share price of Bank of Baroda slipped by 1.5 per cent on Thursday morning to trade at Rs 72.30 apiece after Global rating agency Moody’s Investor Service downgraded Bank of Baroda’s (BoB) baseline credit assessment from BA2 to BA3 on Wednesday. Moody’s also revised BoB’s long-term and short-term counterparty risk assessment to BAA3(cr)/P-3(cr) and the long term and short term domestic currency counterparty risk ratings to Baa3/P-3 from Baa2(cr)/P-2(cr) and Baa2/P-2, respectively. BoB’s gross non-performing assets for the third quarter of this fiscal stood at Rs 75,140 crore.

Moody’s has downgraded BOB’s BCA to ba3 to reflect the weakening in asset quality and further downside risk from the deteriorating operating environment in India,” Moody’s investor service said. The deterioration in asset quality of BoB poses a risk to the performance of the bank. Asset quality in BOB’s micro, small and medium enterprises and agriculture portfolio, which has deteriorated, will continue to weaken further, according to Moody’s. 

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India’s limping economic growth was also weighed in by the credit rating agency which said that lower economic growth in India is negative for sectors such as MSME and agriculture which will drive continued weakness in the segments. Another risk factor asserted by the rating agency was the 16 per cent exposure to nonbank financial institutions that BoB has on its loan books — highest among Moody’s rated banks in India. 

The central government that owns 71.6 per cent stake in Bank of Baroda, as of December 2019, decided to merge BoB with Dena Bank and Vijaya Bank in 2019. Moody’s said that it could change the rating upwards if there is a significant improvement in the asset quality, driven by resolution in non-performing loans leading to an improvement in profitability. 

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