Singapore, June 25, 2021 -- Moody's Investors Service (Moody's) affirmed IDBI Bank Ltd's (IDBI)
long-term deposit and senior unsecured debt ratings at Ba2.
At the same time, Moody's has upgraded the IDBI's baseline
credit assessment (BCA) and adjusted BCA to b1 from b2.
The outlook on the ratings remain stable as IDBI's improving solvency
metrics is offset by risks of lower government support.
The full list of affected ratings is provided at the end of the press
release.
RATINGS RATIONALE
Moody's affirmed IDBI's deposit and senior unsecured debt
ratings because of an increase in uncertainty in the level of extraordinary
support it may receive from the government of India, despite significant
improvements in IDBI's asset quality, capital and quality
of funding which led to an upgrade of the BCA. Uncertainty around
the level of extraordinary support has increased following the announcement
by the authorities of a planned divestment of IDBI.
IDBI's asset quality will remain robust and better than peers in
India in the next 12 to 18 months. The provision coverage ratio
increased to 97% as of end of March 2021, from 91%
at end March 2019, while the net NPL ratio declined to 2%
as of end of March 2021, from 10.1% at end March 2019,
after the bank fully recognized and provided for its legacy problem loans
in the corporate segment. Both its provision coverage ratio and
net NPL ratio compare well with the other rated Indian banks' average
of 78.4% and 2.8% respectively.
Capital has strengthened with the core equity tier 1 ratio increasing
to 13.1% at end March 2021 compared to 10.6%
a year earlier.
Profitability has improved with the bank returning to profit after 5 years
of losses with an ROA of 0.4% in the year ending March 2021.
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 2 notches from the 3 previously.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
IDBI's ratings could be upgraded if it is able to maintain asset
quality and improve profitability from current levels.
IDBI's ratings could be downgraded if the improvements seen in profitability
over the last year do not sustain, driven by an increase in credit
costs and net interest margin contraction.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks Methodology
published in March 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1261354.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
LIST OF AFFECTED RATINGS / ASSESSMENTS
Upgrades:
..Issuer: IDBI Bank Ltd
.... Adjusted Baseline Credit Assessment,
Upgraded to b1 from b2
.... Baseline Credit Assessment, Upgraded
to b1 from b2
Affirmations:
..Issuer: IDBI Bank Ltd
.... Short-term Counterparty Risk Assessment,
Affirmed NP(cr)
.... Long-term Counterparty Risk Assessment,
Affirmed Ba1(cr)
.... Short-term Foreign and Local Currency
Counterparty Risk Ratings, Affirmed NP
.... Long-term Foreign and Local Currency
Counterparty Risk Ratings, Affirmed Ba1
.... Short-term Foreign and Local Currency
Deposit Ratings, Affirmed NP
.... Long-term Foreign Currency Senior
Unsecured Regular Bond/Debenture, Affirmed Ba2, Outlook Remains
Stable
.... Long-term Foreign and Local Currency
Deposit Ratings, Affirmed Ba2, Outlook Remains Stable
..Issuer: IDBI Bank Ltd, DIFC Branch
.... Short-term Counterparty Risk Assessment,
Affirmed NP(cr)
.... Long-term Counterparty Risk Assessment,
Affirmed Ba1(cr)
.... Short-term Foreign and Local Currency
Counterparty Risk Ratings, Affirmed NP
.... Long-term Foreign and Local Currency
Counterparty Risk Ratings, Affirmed Ba1
Outlook Actions:
..Issuer: IDBI Bank Ltd
....Outlook, Remains Stable
..Issuer: IDBI Bank Ltd, DIFC Branch
....Outlook, Remains Stable
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity
analysis, see the sections Methodology Assumptions and Sensitivity
to Assumptions in the disclosure form. Moody's Rating Symbols and
Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social and
governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1263068.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed by
Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main
60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's office
that issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the UK and is endorsed by
Moody's Investors Service Limited, One Canada Square, Canary
Wharf, London E14 5FA under the law applicable to credit rating
agencies in the UK. Further information on the UK endorsement status
and on the Moody's office that issued the credit rating is available on
www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Srikanth Vadlamani
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Graeme Knowd
MD - Banking
Financial Institutions Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
