IDBI Bank bucks trend in weak market; zooms 51% in one month

The stock surged 14% to Rs 91.50, hit a fresh 52-week high on the NSE in intra-day trade on back of heavy volumes

IDBI Bank hit a fresh 52-week high of Rs 91.50, up 14% on the National Stock Exchange (NSE) in intra-day trade, extending its past one month rally, after the credit rating agencies revised the upwards outlook of the bank to stable from negative.

In past one month, the stock of state-owned bank has zoomed 51% from Rs 60.40, as compared to 2.8% decline in the Nifty 50 index.

CRISIL on February 6, 2018 revised its outlook on the Tier II bonds (under Basel III), Infrastructure bonds, Lower Tier II bonds (under Basel II), Omni bonds, Flexi bonds, Upper Tier II bonds (under Basel II), Tier I Perpetual bonds (under Basel II) and the Fixed deposit programme of to 'Stable' from 'Negative', while reaffirming the ratings at 'CRISIL A+/CRISIL A/FAA'.

CRISIL believes the government’s recapitalization plans will improve the financial risk profile of IDBI Bank, help in meeting Basel III regulatory capital norms, and provide a cushion against expected rise in provisioning for non-performing assets (NPAs).

Additionally, CRISIL believes that asset quality issues are peaking with incremental slippages to NPAs expected to taper in fiscal 2018 and 2019. This coupled with likely revival of credit growth in medium term will support IDBI Bank's performance.

On February 9, CARE Ratings had revised its outlook on the Lower Tier II bonds to ‘stable’ from ‘negative’.

The revision in outlook is driven by significant capital support extended to the bank by the government under its recapitalization scheme of public sector banks, the rating agency said in release.

Under the scheme, IDBI Bank is slated to receive capital of Rs 106 billion in the current financial year thereby providing substantial comfort to the capital position of the bank in light of elevated provisioning for NPAs as well as IndAS adoption, it added.

Last week on February 27, Moody's Investors Service, ("Moody's") has affirmed the long-term local and foreign currency bank deposit rating of IDBI Bank at B1, and changed the outlook to positive from stable.

The positive outlook factors in Moody's view on the expected evolution of IDBI's balance sheet, including a stabilization in asset quality and continued stable funding and liquidity positions.

Given the positive outlook, IDBI's ratings could be upgraded in the next 12-18 months, if the capital infusion helps strengthen the bank's capital to a level above minimum regulatory requirements (including the capital conservation buffer) under Basel III standards, and/or the bank returns to profitability on a sustainable basis, Moody’s said in press release.

At 02:39 pm; IDBI Bank was trading 8% higher at Rs 87 on the NSE, as compared to 0.93% decline in the Nifty 50 index. The trading volumes on the counter more than doubled with a combined 105 million equity shares representing 4% of total equity of IDBI Bank changed hands on the NSE and BSE so far.