Central Bank of India need to raise Rs 6,500 crore in 2 years: ICRA
Kolkata: State-run lender Central Bank of India would need to raise Rs 6000-6500 crore in next two years to keep its depleting capital above the regulatory minimum, rating company ICRA said Tuesday.
The size of likely capital requirement is about 36-40% of the bank's current market capitalization.
With limited resolution in stressed accounts and continued fresh slippages, ICRA expect the bank’s profitability to remain under pressure and consequently require sizeable capital to meet the minimum regulatory levels.
The bank's asset quality has remained poor too with gross non performing assets ratio at 14.14% at the end of December last year.
The rating firm has lowered the ratings on bank's bonds as sustained poor operating and financial performance have inflicted stress in the bank's capital levels.
It has downgraded the lower tier II bonds worth Rs 1,159 crore to A+ from AA- with a negative outlook. Ratings for Rs. 2,285 crore upper tier II bonds were downgraded by a notch to A from A+ with a negative outlook.
The Mumbai-based lender reported net losses of Rs 1,847 crore for the first nine months this fiscal as against loss of Rs 1,418 crore for FY16.
The government has budgeted to infuse Rs 1729 crore in the bank during FY17, while it received 75% of it or Rs 1297 crore. It may not get the balance amount as it failed to fulfil the performance criteria laid down by the government like many other lenders.
The bank's capital adequacy ratio was at 9.99% with tier 1 capital at 7.87% under Basel III calculation, after adjusting the loss of Rs 1,958 crore in nine months.
"With internal capital generation expected to remain under pressure, the bank would require additional equity support from the government to meet the enhanced tier I capital requirements under Basel III, going forward," the rating firm said.
The size of likely capital requirement is about 36-40% of the bank's current market capitalization.
With limited resolution in stressed accounts and continued fresh slippages, ICRA expect the bank’s profitability to remain under pressure and consequently require sizeable capital to meet the minimum regulatory levels.
The bank's asset quality has remained poor too with gross non performing assets ratio at 14.14% at the end of December last year.
The rating firm has lowered the ratings on bank's bonds as sustained poor operating and financial performance have inflicted stress in the bank's capital levels.
It has downgraded the lower tier II bonds worth Rs 1,159 crore to A+ from AA- with a negative outlook. Ratings for Rs. 2,285 crore upper tier II bonds were downgraded by a notch to A from A+ with a negative outlook.
The Mumbai-based lender reported net losses of Rs 1,847 crore for the first nine months this fiscal as against loss of Rs 1,418 crore for FY16.
The government has budgeted to infuse Rs 1729 crore in the bank during FY17, while it received 75% of it or Rs 1297 crore. It may not get the balance amount as it failed to fulfil the performance criteria laid down by the government like many other lenders.
The bank's capital adequacy ratio was at 9.99% with tier 1 capital at 7.87% under Basel III calculation, after adjusting the loss of Rs 1,958 crore in nine months.
"With internal capital generation expected to remain under pressure, the bank would require additional equity support from the government to meet the enhanced tier I capital requirements under Basel III, going forward," the rating firm said.
