Moody's Investors Service on Friday affirmed IDBI Bank Ltd's long-term deposit and senior unsecured debt ratings at Ba2.
At the same time, it has upgraded IDBI's baseline credit assessment and adjusted BCA to b1 from b2. Moody's said the outlook on ratings remain stable as IDBI's improving solvency metrics is offset by risks of lower government support. It said IDBI's asset quality will remain robust and better than peers in the next 12 to 18 months.
The provision coverage ratio increased to 97 percent as of end of March from 91 percent at end March 2019 while the net NPL ratio declined to 2 percent as of end of March from 10.1 percent at end March 2019 after the bank fully recognised and provided for its legacy problem loans in the corporate segment.
Both its provision coverage ratio and net non-performing loan ratio compare well with the other rated Indian banks' average of 78.4 percent and 2.8 percent respectively.
Capital has strengthened with the core equity tier 1 ratio increasing to 13.1 percent at end March compared to 10.6 percent a year earlier.
Profitability has improved with the bank returning to profit after five years of losses with return on assets of 0.4 per cent in the year ending March.
The government has announced a plan to divest a majority stake in the bank along with management control to strategic investors.
As a result, while Moody's continues to assume a very high level of extraordinary support from the government, the rating uplift is reduced to two notches from the three previously.
