Syndicate, BOI, IOB downgraded by S&P

S&P reduced the long-term issuer rating for Manipal-based Syndicate Bank to "BB+" from "BBB-"

Global rating agency Standard & Poor's has revised the ratings and outlook for five public sector banks - Bank of India (BOI), Syndicate Bank of India, Indian Overseas Bank (BOI), Union Bank of India and IDBI Bank.

The rating action was driven by a sharp rise in bad loans in 2015-16 and a bleak outlook for asset quality over the next 12 months.

S&P lowered BOI's long-term issuer credit rating from "BBB-" to "BB+". S&P Global Ratings Credit Analyst Amit Pandey said the agency downgraded BOI as was expected the bank's asset quality would remain weak over the next 12 months, following a recent deterioration.

The operating conditions for the corporate sector in India are tough.

In this backdrop, BOI's credit costs are expected to remain high due to continued pressure on asset quality.

S&P reduced the long-term issuer rating for Manipal-based Syndicate Bank to "BB+" from "BBB-". It downgraded Syndicate as its asset quality was expected to remain weak over the next 12 months, following a deterioration in the past two quarters.

The gross non-performing asset (NPA)'s ratio more than doubled to 6.7 per cent in March 2016, from 3.1 per cent in March 2015. However, Syndicate's restructured book, at 2.4 per cent, remained one of the lowest among the banks rated by the agency. For Chennai-based IOB, S&P cut long-term issuer credit rating to "BB" from "BB+".

The rating was downgraded because the bank's asset quality might remain weak over the next 12 months, following a deterioration in the past few quarters.

The gross non-performing asset ratio more than doubled to 17.4 per cent in March 31, 2016, from 8.3 per cent in March 2015.

The rating agency changed the outlook of Mumbai-based Union Bank of India from "stable" to "negative". At the same time, it affirmed long-term issuer rating at "BBB-".

"We revised the outlook on Union Bank because of the risk of a potential further deterioration in the bank's asset quality over the next 12-18 months," S&P said.

For Mumbai-based IDBI Bank, S&P affirmed ratings but lowered assessment of stand-along credit profile.

Pandey said: "We affirmed the rating to reflect our expectation that the likelihood of support to IDBI from the government of India will remain very high."

"At the same time, we have lowered our assessment of IDBI's stand-alone credit profile (SACP) to BB- from BB because we expect the bank's asset quality to remain weak over the next 12 months," S&P added.