India Ratings and Research (Ind-Ra) has affirmed Bank of Baroda's (BoB's) long-term issuer rating at AAA with a stable outlook and short-term issuer rating at A1-plus.
The ratings continue to reflect BoB's highly-systemically important position and hence a high probability of support from the government which has 63.97 per cent if required.
Ind-Ra said the ratings also reflect BoB's large franchise with a pan-India presence, strong capitalisation, adequate funding base and liquidity, and an in-line-with-peers' provision coverage ratio (PCR).
Slippages for BoB although remained elevated have declined on a year-on-year basis in FY21 and it remains a key monitorable in the near term.
The AT1 bonds rating reflects the bank's strong standalone credit profile, along with its ability to service coupons and manage principal write-down risk on its debt capital instruments.
To arrive at the rating, Ind-Ra considered the discretionary component, coupon omission risk and the write-down/conversion risk as key parameters.
The agency recognised unique going-concern loss absorption features that these bonds carry and differentiates them from the bank's senior debt, factoring in a higher probability of an ultimate loss for investors in these bonds.
Ind-Ra said it envisages coupon deferrals and principal write-down risk as a remote possibility in view of the bank's adequate revenue reserve buffers.
At end-1Q FY22, BoB had a network of 8,192 branches within India, 96 overseas offices across 19 countries, and 11,637 ATMs and cash recyclers.
Of the gross advances book, 36.3 per cent consisted of loans to the corporate segment, 16.8 per cent to retail, 12.3 per cent to micro, small and medium enterprises, 13.6 per cent to agriculture and 5.5 per cent were others.
International advances constituted 15.5 per cent of the gross advances.
