India Ratings and Research (Ind-Ra) has revised
IDBI Bank Limited’s (IDBI) Outlook to Stable from Negative while affirming the Long-Term Issuer Rating at ‘IND A’ and its Short-Term Issuer Rating at ‘IND A1’
The ratings on Basel III compliant bonds (Rs200cr), Omni infrastructure bonds (Rs800cr), Basel III compliant Tier II bonds (Rs300cr), and Senior debt Rs363.1cr have been affirmed at ‘IND A’ and outlook revised to Stable from Negative.
The Deposit rating has been affirmed at Ind tA/ Stable and the outlook revised to Stable from Negative. The credit rating agency has also affirmed IND A1 rating on Certificates of deposits Rs1600cr.
“Ind-Ra has not factored in capital support from its majority stakeholders - the government of India (GoI) and Life Insurance Corporation of India (LIC) - to arrive at the ratings, owing to their planned strategic divestment in the bank.
The Outlook revision reflects an improvement in IDBI’s standalone financials as indicated by above 95% provision cover on gross nonperforming assets (NPAs) and below 2% cover on net NPAs at FYE21, which is among the lowest among similar rated peers. Furthermore, the bank had the highest low-cost current account savings account deposits of 50.5% at FYE21. The bank has Rs5billion of provisions for the second wave of COVID-19 infections, Also, the earlier provisions of Rs3.6 billion for the first wave were not fully utilised as of March 2021; the bank could utilise it in FY22,” the Bank shared Ind-Ra’s rating rationale on Monday.
It further said, IDBI came out of the Reserve Bank of India’s Prompt Corrective Action (PCA) Framework after four years in March 2021. The bank now has the opportunity to build its balance sheet in a calibrated manner while maintaining the share of non-corporate segments, given it witnessed a decline in net advances for four consecutive years starting FY17. This could aid IDBI in arresting the loss in market share (FY21 gross advances market share: 1.5%, FY17: 2.7%) and maintaining its share. The bank has put systems in place for parameterised and scorecard-based credit models for several noncorporate segments. IDBI plans to slowly make headway in the mid-corporate segment.
At around 11.20 AM, IDBI Bank Ltd was trading flat at Rs38.20 per piece on the BSE.