Moody’s downgrades 4 public sector banks, outlook unfavourable

Mumbai, September 4

Moody’s Investors Service on Friday downgraded the long-term native and overseas forex deposit scores of Bank of Baroda, Bank of India, Canara Bank and Union Bank of India to Ba1 from Baa3. The scores company additionally downgraded Baseline Credit Assessments (BCAs) of all of the 4 lenders to B1 from Ba3. The outlook on the scores of the 4 banks is unfavourable. 

Moody’s Investors Service


The Baseline Credit Assessment downgrades consider rising dangers to the banks’ asset high quality because of the extreme financial contraction, which is able to end in a rise in credit score prices

It affirmed Punjab National Bank’s (PNB) long-term native and overseas forex deposit scores at Ba1 and its BCA at B1 however modified its scores outlook to unfavourable from steady.

Deepening financial slowdown exacerbated by the coronavirus outbreak will pressure the standalone credit score power of the banks, the company mentioned. Prolonged monetary stress amongst households, weak job creation and a credit score crunch amongst non-bank monetary corporations will result in an increase in non-performing loans, delaying the continued clean-up of banks’ steadiness sheets, it mentioned.

On Bank of Baroda (BoB), Bank of India (BoI), Canara Bank and Union Bank, it mentioned, “The BCA downgrades take into consideration rising risks to the banks’ asset quality as a result of the severe economic contraction, which will result in an increase in credit costs.” This enhance in credit score prices will damage profitability and likewise pressure the banks’ modest capitalisation, reversing latest enhancements, it mentioned.

The company, nevertheless, mentioned funding and liquidity proceed to be key credit score strengths given their standing as public sector banks, which leads to good deposit franchises.

The banks’ Ba1 long-term native and overseas forex deposit scores incorporate three-notches of uplift from their B1 BCAs to mirror Moody’s assumption of a really excessive chance of assist from the federal government in instances of want. Moody’s mentioned the unfavourable outlook elements in additional draw back dangers to the banks’ monetary profiles due to the nation’s unsure working setting. — PTI

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