ICRA downgrades IDBI Bank’s various debt instruments

The Dollar Business Bureau

Credit Rating agency ICRA has downgraded IDBI Bank’s various debt instruments, in the backdrop of weak financial results of the bank in the third quarter of the current fiscal.

The October-December quarter result of the IDBI Bank has resulted in a considerable erosion of its common equity tier I (CET 1). In order to stay afloat, the Bank would need capital infusion of Rs.9500 – Rs.10,000 crore by the end of 2016-17.

Last week, IDBI Bank’s board members held a meeting to consider a plan to sell its non-core assets to raise capital for the bank. Meanwhile, the government which owns 74% stake in the bank is expected to infuse about Rs.3000 crore.

ICRA downgraded ratings for IDBI Bank’s Rs.25,742.72 crore senior and lower tier II bonds programme, Rs.8,000 crore infrastructure bonds programme and Rs.230.50 crore flexi bonds series.

ICRA also downgraded IDBI Bank’s rating for Rs.5,000 crore Basel III compliant tier II bonds to AA-(hybrid) from AA(hybrid), for the Rs.2,500 crore additional tier I bonds programme under Basel III to A(hyb) from A+(hyb) and for the Rs.4,286.20 crore upper tier II and Rs1,708.80 crore Basel II compliant perpetual bonds programme to A+ from AA-, ICRA said in a statement on Friday.

“The rating downgrade takes into account the substantially weak operating and financial performance of the bank during the third quarter of the financial year 2016-17 which has resulted in a significant erosion of the bank’s capital (CET-I),” it said.

The rating agency also expected the bank to remain under huge pressure to meet the minimum regulatory target of 6.75% required till the end of the ongoing financial year. The bank‘s CET I was at 7.24% till December 31, 2016.

With the ongoing pressure on profitability and limited visibility on capital infusion, the Bank’s capital requirements are sizeable and immediate, it said.