S&P affirms BB+ long-term credit ratings on IDBI Bank

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Published: May 31, 2016 7:20:26 AM

S&P Global Ratings on Monday affirmed its 'BB+' long-term and 'B' short-term foreign currency issuer credit ratings on IDBI Bank and said the outlook on long-term rating was stable.

S&P Global Ratings on Monday affirmed its ‘BB+’ long-term and ‘B’ short-term foreign currency issuer credit ratings on IDBI Bank and said the outlook on long-term rating was stable.

“We affirmed the rating to reflect our expectation that the likelihood of support to IDBI from the government of India will remain very high,” said Amit Pandey, credit analyst, S&P Global Ratings.

Pandey said the rating agency lowered its assessment of IDBI’s standalone credit profile (SACP) to ‘bb-‘ from ‘bb’ because it expects the bank’s asset quality to remain weak over the next 12 months. “IDBI’s recent performance was weaker than our expectations.”

The bank’s non-performing loan (NPL) ratio rose by 200 basis points (bps) to 10.9% in Q4 FY16, after a similar rise in Q3. “This 400 bps rise in the past six months is one of the highest increases among the Indian banks we rate,” S&P said in a statement, adding that it expects IDBI’s credit costs to remain high because of the bank’s weak asset quality.

“IDBI has grown cautiously over the past few years. But, given the bank’s chunky loan book, we see pressure on its asset quality. Loans to the top 20 customers were about 15% of total advances and 225% of the bank’s equity as of March 31, 2015, an improvement over the previous year but still higher than peers,” the agency said.

IDBI Bank’s ratio of standard restructured loans to total loans stood at around 7.6% as on March 2016. “We believe IDBI could continue to see migration from its standard restructured book into NPLs in the next few quarters. Accordingly, we have moved the bank’s risk position score to weak,” it added.

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