"Lowered foreign currency issuer credit rating on India-based IDBI Bank to 'BB+/B' from 'BBB-/A-3'. The outlook on the long-term rating is negative," S&P said in a release. 'BB+' is considered the highest speculative grade by market participants, while 'BBB-' is the adequate capacity to meet financial commitments, but more subject to adverse economic conditions.
Also read: Consolidation on the cards for Indian telecom sector: Fitch
Standard & Poor's Ratings Services bases its rating on IDBI on the bank's 'adequate' business position, 'moderate' capital and earnings, 'moderate risk position, 'average' funding, and 'adequate' liquidity, it said.
"We downgraded IDBI because we expect the bank's asset quality to remain weak over the next 12-18 months," said Standard & Poor's credit analyst Amit Pandey. S&P further said: "We also lowered the issue ratings on the bank's senior debt to 'BB+' from 'BBB-', subordinated debt to 'BB-' from 'BB+', and junior subordinated debt to 'B' from 'B+'.
At the same time, S&P lowered its long-term ASEAN regional scale rating and Greater China regional scale rating on the bank's outstanding senior debt by one notch to 'axBBB' and 'cnBBB', respectively.
conditions in India.
"In our view, this could lead to higher average credit costs. Moreover, IDBI's loan book is fairly concentrated in terms of single-name exposure." However, the ratings firm said it still see a very high likelihood that the government will provide timely and sufficient extraordinary support if the bank comes under financial distress.
In a separate release, S&P said it has affirmed its 'BBB-' long-term and 'A-3' short-term issuer credit ratings on Indian Bank.
A-3 exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation "The outlook on the long term rating is negative. We are also affirming the outstanding issue ratings on the India-based bank's debt," it said.
However, the ratings agency lowered Indian Bank's stand-alone credit profile to 'bbb-' from 'bbb' following the revision in assessment of the bank's risk position to 'moderate' from 'adequate'.
"We anticipate that the bank's asset quality will remain under pressure over the next 12-18 months," Pandey said.
IDBI Bank stock price
On November 25, 2013, IDBI Bank closed at Rs 64.80, up Rs 1.45, or 2.29 percent. The 52-week high of the share was Rs 118.20 and the 52-week low was Rs 52.30.
The company's trailing 12-month (TTM) EPS was at Rs 11.03 per share as per the quarter ended September 2013. The stock's price-to-earnings (P/E) ratio was 5.87. The latest book value of the company is Rs 159.34 per share. At current value, the price-to-book value of the company is 0.41.
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