Halister News

(Bloomberg) -- ICRA on Wednesday cut Bank of Maharashtra’s Basel III tier 1 bonds to A- from A and tier 2 notes to AA- from AA, the ratings company says in a statement on its website.

• Weak operating and financial performance during last financial year ended March 31 prompted the downgrade, says ICRA, adding that increasing non-performing assets and net losses during the year resulted in significant weakening of solvency levels
• Lender has one of the lowest provision coverage ratios in the industry at 35% as on March 31: ICRA
• “Given the current low provisioning coverage, ICRA expects the bank’s credit costs to remain high over the next two years on account of both incremental slippages and ageing of current NPAs,” analysts including Karthik Srinivasan wrote in the note
  • “This will result in profitability pressures remaining high in the near to medium term”
• ICRA’s estimates the bank will need to raise common equity of INR20b- INR30b during this fiscal year and next to meet the minimum regulatory capital requirements
  • “These capital estimates will also increase to the extent of the losses reported by the bank during the projected period”
• Ratings continue to draw comfort from the bank’s majority sovereign ownership and its healthy and stable deposits base
• ICRA has also downgraded Bank of Maharashtra’s Basel II lower tier 2 notes to AA- from AA and upper tier 2 bonds to A+ from AA-
• Related story:
  • RBI initiates prompt corrective action on Bank of Maharashtra

To contact the reporter on this story: Divya Patil in Mumbai at dpatil7@bloomberg.net To contact the editors responsible for this story: Neha D'silva at ndsilva1@bloomberg.net Chan Tien Hin