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Rating agency Moody's has cut the Central Bank of India’s baseline credit assessment to B3, from B1, due to a net loss of Rs 1,510 crore in the September quarter. The state-owned bank’s loss largely offsets the Rs 1,800 crore capital injection the government will make in FY14.
However, Moody’s has reaffirmed a Baa3/Prime-3 rating for the Mumbai-based lender’s global local currency and foreign currency bank deposits. The outlook on the bank financial strength rating has been changed to negative, from stable. The outlook on long-term ratings remains negative, indicating the bank's credit quality will continue to be under pressure over the next 12-18 months.
Moody’s said it assumed a very high probability of systemic support to Central Bank, which mitigated a weak standalone credit profile.
The government has provided the bank with capital injections in three successive years (in FY11, FY12 and FY13).
The previous standalone assessment had assumed the government's capital injection in 2013-14 would provide an improved capital buffer against losses and allow the bank to improve its asset quality and capital metrics. However, the quarterly loss in September indicates the capital injection expected will not materially improve the asset quality and capital position, Moody’s said.
Asset quality remains weak, with a reported gross non-performing loans (NPL) ratio of 6.5 per cent as of September 30, versus 4.8 per cent at March 31. Provisioning, excluding those for standard assets, remained stable but inadequate at 43.7 per cent of gross NPLs as of end-September.
More, gross NPLs were over 60 per cent of equity. Standard restructured assets increased 13.7 per cent, to 12.8 per cent of gross loans as of September 30, from 11.4 per cent at end-March. If standard restructured loans are added to gross NPLs, the impaired loans ratio would be 19.3 per cent of gross loans as of end-September, it added.
However, Moody’s has reaffirmed a Baa3/Prime-3 rating for the Mumbai-based lender’s global local currency and foreign currency bank deposits. The outlook on the bank financial strength rating has been changed to negative, from stable. The outlook on long-term ratings remains negative, indicating the bank's credit quality will continue to be under pressure over the next 12-18 months.
Moody’s said it assumed a very high probability of systemic support to Central Bank, which mitigated a weak standalone credit profile.
The government has provided the bank with capital injections in three successive years (in FY11, FY12 and FY13).
The previous standalone assessment had assumed the government's capital injection in 2013-14 would provide an improved capital buffer against losses and allow the bank to improve its asset quality and capital metrics. However, the quarterly loss in September indicates the capital injection expected will not materially improve the asset quality and capital position, Moody’s said.
Asset quality remains weak, with a reported gross non-performing loans (NPL) ratio of 6.5 per cent as of September 30, versus 4.8 per cent at March 31. Provisioning, excluding those for standard assets, remained stable but inadequate at 43.7 per cent of gross NPLs as of end-September.
More, gross NPLs were over 60 per cent of equity. Standard restructured assets increased 13.7 per cent, to 12.8 per cent of gross loans as of September 30, from 11.4 per cent at end-March. If standard restructured loans are added to gross NPLs, the impaired loans ratio would be 19.3 per cent of gross loans as of end-September, it added.
