S&P revises ratings outlook on BOI to negative; places IOB on credit watch

Global rating agency Standard & Poor’s (S&P) on Tuesday downgraded the rating outlook on Bank of India (BOI) and placed Indian Overseas Bank (IOB) on credit watch, with negative implications. However, on IDBI the rating major maintained a stable outlook.

S&P in its review of the PSU banks revised the outlook on BOI to negative from stable because of a potential deterioration in the bank's asset quality and capitalization. At the same time, the rating agency affirmed 'BBB-' long-term; and 'A-3' short-term issuer credit ratings on Bank of India; and 'BBB-' long-term issue ratings on the bank's senior unsecured notes as S&P continues to see a very high likelihood of extraordinary government support for the bank in the coming future in terms of capital infusion. "We revised the outlook to negative because we expect Bank of India's asset quality to continue to weaken over the next 12-18 months, further straining the bank's capitalization and profitability," said Standard & Poor's credit analyst Amit Pandey.

Standard & Poor's Ratings Services said that it had placed its 'BB+' long-term; and 'B' short-term issuer credit rating pertaining to Indian Overseas Bank (IOB) on CreditWatch with negative implications. The  agency affirmed 'BB+' long-term issue rating on the banks' senior unsecured notes on CreditWatch with negative implications. "Our rating action reflects our expectation that IOB's mounting credit losses have strained its capitalization and make it more onerous for the bank to meet the minimum regulatory capital requirement by March 2016," said Standard & Poor's credit analyst Amit Pandey.

S&P maintained its negative outlook on Syndicate Bank. Rating agency kept its 'BBB-' long-term issuer credit rating. At the same time, it affirmed 'A-3' short-term rating on the bank and 'BBB-' long-term issue ratings on the bank's senior unsecured notes. "The rating also reflects the fact that Syndicate's asset quality remains better than the industry average despite having deteriorated in the third quarter of the fiscal year ending March , 2016," said Amit Pandey.

However, in a positive frame for IDBI Bank, S&P affirmed its 'BB+' long-term foreign currency issuer credit rating on IDBI Bank with a stable outlook. At the same time, the rating agency affirmed 'B' short-term rating on the bank and 'BB+' long-term issue on IDBI's senior unsecured notes. S&P’s rating has been reflective of the pain been felt by the entire banking sector of the country and in particular by PSU banking companies.

With poor Q3FY16 results from most of the banking majors, due to rising NPA’s and provisioning, has been factored into the ratings by the agency. Responding to the credit watchdogs reports CNX PSU Bank index was trading in red by shedding more than 2.2 per cent. Majors casualty among those included Bank of India and IOB which were down 5 and 6 per cent respectively.