Global rating agency Fitch Ratings on Monday downgraded IDBI Bank’s long-term issuer default rating (IDR) to BB+ from BBB-, but kept the state-run lender’s outlook stable.
The viability rating of the lender was also cut to ccc from bb-.
“The revisions are driven by our expectation of a moderate probability of extraordinary state support due to the bank’s waning market position and systemic importance,” Fitch said in a note.
The bank’s competitive position and its systemic importance have and will continue to be eroded as it deals with poor asset quality and a weak capital position, it said.
The bank’s gross non-performing assets (NPAs) almost doubled to 21.25 percent of the gross advances in the fourth quarter of financial year 2016-17, compared with 10.98 percent in the corresponding period of the previous fiscal. The net NPAs were 13.21 percent against 6.78 percent.
The agency, however, said the bank’s large size, substantial deposit base and continued majority state ownership will likely keep the probability of government support.
Fitch said the stable outlook on the bank mirrors the outlook on the country rating (BBB-/Stable), reflecting its view of no significant change in the sovereign’s ability to support banks during extraordinary stress.
It said the bank’s viability rating reflects the deterioration of its financial profile in the last two years and expectation that both asset quality and capital will remain significant ongoing weaknesses.
Last week Moody’s had downgraded the bank's ratings to Ba2 from Baa3 on the back of weak financial affected by deteriorating asset quality and high risk to its solvency profile.
India Ratings and ICRA have also downgraded the bank's rating with a negative outlook.
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