ICRA reduces outlook of banks

Rating agency ICRA Ltd on Monday lowered the debt rating of Bank of India by one notch, and cut long-term outlook for Central Bank of India, UCO Bank and Indian Overseas Bank, from stable to negative on asset quality concerns.

The rating agency had on Friday lowered the outlook of United Bank of India and cut ratings of debt papers of Oriental Bank of Commerce on similar concerns.

However, in all cases, the rating agency said government ownership was a comfort area.

The rating agency had then said it expected stress on Indian banks to continue for two-three years.

While downgrading Bank of India's debt papers' ratings from AA+ to AA, ICRA said the revisions were on account of higher than anticipated stress, slower than expected pace of recovery and weak outlook for several credit intensive sectors, leading to a sharp deterioration in asset quality indicators of the bank and impacting the earnings profile.
 
ICRA also said the earnings profile of the bank over the medium term "is likely to remain weak given the relatively high share of stressed assets and relatively high un-provided NPAs (non-performing assets)". The bank's restructured assets as a percentage of standard and other weak assets stood at 4.34 per cent and new NPA as on December 31 was at 5.25 per cent of its advances.

"Limited visibility on capital availability to fully support credit growth while meeting the regulatory minimum requirement also constrains the rating," the agency said.

The argument for other banks also were on the same lines.