Moody’s downgrades state-owned Indian bank
(21 March 2012 – India) Moody’s Investors Service downgraded the rating of Union Bank of India (UBI), one of India’s largest state-owned banks on Monday.
Moody’s stated that UBI’s weak asset quality and inadequate loss-absorption capacity were the main reasons for the downgrade from ‘D+’ to ‘D’ while global local currency deposits were cut from Baa2/Prime-2 to Baa3/Prime-3.
In the revised ratings, bank financial strength (BFSR) has been cut from ‘D+’ to ‘D’, while global local currency deposits were cut from Baa2/Prime-2 to Baa3/Prime-3.
Other ratings that were cut include foreign currency senior debt (from Baa2 to Baa3) and the foreign currency senior medium-term note programme (from Baa2 to Baa3).
The foreign currency long-term/short deposit rating of Baa3/Prime-3 with a stable outlook was retained.
Moody’s vice-president and senior credit officer, Beatrice Woo, said the rating action considers UBI’s weaker financial metrics, particularly its high level of troubled assets and low provision coverage. These factors have pushed the bank into a lower standalone rating band.
"When balancing these factors and its overall franchise value, the revised rating ranks UBI more appropriately, compared with other Moody’s-rated Indian mid-sized public-sector banks," Woo said.
In the revised ratings, bank financial strength (BFSR) has been cut from ‘D+’ to ‘D’, while global local currency deposits were cut from Baa2/Prime-2 to Baa3/Prime-3.
Other ratings that were cut include foreign currency senior debt (from Baa2 to Baa3) and the foreign currency senior medium-term note programme (from Baa2 to Baa3).
The foreign currency long-term/short deposit rating of Baa3/Prime-3 with a stable outlook was retained.
Moody’s vice-president and senior credit officer, Beatrice Woo, said the rating action considers UBI’s weaker financial metrics, particularly its high level of troubled assets and low provision coverage. These factors have pushed the bank into a lower standalone rating band.
"When balancing these factors and its overall franchise value, the revised rating ranks UBI more appropriately, compared with other Moody’s-rated Indian mid-sized public-sector banks," Woo said.
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