Rating agency CRISIL has downgraded the tier-I and tier-II bonds of Central Bank of India to ‘AA’ from ‘AA+’ on expected weakening of credit profile on the sustained deterioration in asset quality and earnings.
The Mumbai-based public sector lender is witnessing a sharp and sustained deterioration in asset quality. Its gross non-performing assets (NPA) increased significantly to 6.0 per cent as on June 30, from 1.8 per cent as on March 31, 2011.
The deterioration in the bank’s asset quality is also reflected in its higher-than-industry-average slippages at 5.6 per cent (annualised) for the quarter ended June 30, (3.5 per cent in 2012-13), CRISIL said in a statement
Rajeev Rishi, chairman and managing director, told Business Standard non-performing assets is a concern for the bank.
The bank has stepped up efforts to recover non-performing accounts. The recovery has been in excess of Rs 700 crore till now, he said.
CRISIL reaffirmed the bank’s certificates of deposit programme at “A1+”.
The ratings continue to factor in the strong support that Central Bank is likely to receive from the Government of India, the bank’s sizeable scale of operations, and its adequate resource profile.
Furthermore, the bank had a large proportion of restructured standard assets of 13.2 per cent as on June 30. The bank’s asset quality will remain weak over the medium term, given the challenging macroeconomic environment and the bank’s large exposure to vulnerable sectors such as infrastructure (particularly to power sector), construction, and iron and steel.
Central Bank also has a weak earnings profile, marked by low interest margins and high provisioning costs. The bank’s return on assets ratio remains significantly lower than that of its peers at around 0.03 per cent (annualised) for the quarter ended June 30, 2013 (0.4 per cent in 2012-13).
The bank’s profitability will continue to be adversely impacted by an increase in provisioning costs because of the asset quality challenges. Additionally, the bank’s net interest margins are likely to remain under pressure over the next few quarters because of high borrowing costs, CRISIL said.
NAUSHAD ALAM
PGDM 1ST
The Mumbai-based public sector lender is witnessing a sharp and sustained deterioration in asset quality. Its gross non-performing assets (NPA) increased significantly to 6.0 per cent as on June 30, from 1.8 per cent as on March 31, 2011.
The deterioration in the bank’s asset quality is also reflected in its higher-than-industry-average slippages at 5.6 per cent (annualised) for the quarter ended June 30, (3.5 per cent in 2012-13), CRISIL said in a statement
Rajeev Rishi, chairman and managing director, told Business Standard non-performing assets is a concern for the bank.
The bank has stepped up efforts to recover non-performing accounts. The recovery has been in excess of Rs 700 crore till now, he said.
CRISIL reaffirmed the bank’s certificates of deposit programme at “A1+”.
The ratings continue to factor in the strong support that Central Bank is likely to receive from the Government of India, the bank’s sizeable scale of operations, and its adequate resource profile.
Furthermore, the bank had a large proportion of restructured standard assets of 13.2 per cent as on June 30. The bank’s asset quality will remain weak over the medium term, given the challenging macroeconomic environment and the bank’s large exposure to vulnerable sectors such as infrastructure (particularly to power sector), construction, and iron and steel.
Central Bank also has a weak earnings profile, marked by low interest margins and high provisioning costs. The bank’s return on assets ratio remains significantly lower than that of its peers at around 0.03 per cent (annualised) for the quarter ended June 30, 2013 (0.4 per cent in 2012-13).
The bank’s profitability will continue to be adversely impacted by an increase in provisioning costs because of the asset quality challenges. Additionally, the bank’s net interest margins are likely to remain under pressure over the next few quarters because of high borrowing costs, CRISIL said.
NAUSHAD ALAM
PGDM 1ST
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