CARE downgrades Catholic Syrian bank's tier II bonds on weak asset quality, net loss

Bank has reported operating profit during FY15 & H1FY16, higher provisions towards non-performing assets resulted in after tax losses

CARE Ratings has downgraded lower tier-II bonds of Catholic Syrian Bank (CSB) to “BBB-” from “BBB” for weakening asset quality, rising provisions and losses.

The rating action is primarily on account of moderation in asset quality, resultant increase in provisions and consequent losses during FY15 and first half of FY16 (ended September 30). Though the bank has reported operating profit during FY15 and first half of FY16, higher provisions towards non-performing assets resulted in after tax losses.

For FY15, CSB reported net loss of Rs 53 crore over total income of Rs 1,672 crore with total capital adequacy ratio of 11 per cent. For first half of FY16, CSB reported net loss of Rs 41 crore over total income of Rs 814 crore. Despite losses, the bank has been able to maintain capital adequacy during FY15 through mobilisation of fresh capital.

The rating factors in the long-standing track record of the operations, niche market positioning characterised by an extensive market presence in the rural and semi-urban markets, particularly in Kerala, and comfortable liquidity position.

The rating is constrained by its relatively small size of operations and regional concentration of business.

CARE said the bank has taken some steps to improve its asset quality.

The private lender has started focusing on retail loans, small and medium enterprises and agri-loans while reducing its exposure to corporate segment.

Going forward, the ability to improve its asset quality by preventing any significant slippages, sustainable improvement in performance and capitalisation levels will remain the key rating sensitivities, it said.

Thrissur-based bank has a network of 431 branches and 233 ATMs.