IDBI Bank hits 52-week high, rallies 24% in 4 days on rating upgrade

Shares of IDBI Bank rallied for the fourth straight session to hit a fresh 52-week high of Rs 48.75 on the BSE. With a rise of 8.5 per cent in the intra-day session on Thursday, the stock has gained nearly 24 per cent in the last four days following a revision in ratings by ICRA. The company on September 27 informed exchanges that the rating agency has upgraded the bank's existing ratings while keeping the outlook stable.

At 10.50 am, the stock was up 5.5 per cent at Rs 47.40 on the BSE as against a fall of 0.03 per cent in the S&P BSE Sensex.

The bank in an exchange filing said ICRA has upgraded its existing rating to ICRA A+ from ICRA A for Infrastructure bonds, Flexi Bond, Senior & Lower Tier II bonds and Subordinate debt. Further, the rating has been upgraded to ICRA A+ from ICRA A (Hyb) for Basel III Tier II Bonds and to ICRA A from ICRA BBB+ for Basel II Upper Tier II bonds.

The company added that ICRA has reaffirmed the short-term rating on the Certificate of Deposit programme at ICRA Al+ and MAA- for Fixed Deposit programme.

The rating upgrade factors in the sustained improvement in the credit profile of IDBI Bank with expectations that the internal capital generation is likely to be sufficient for growth as well as for maintaining sufficient cushion over the regulatory capital requirements, ICRA said in its rating rationale.

"Despite the stated intention of the government and LIC to divest their ownership, the share of current and savings account (CASA) deposits and retail term deposits witnessed a steady growth leading to improved granularity in the deposit base. The bank’s ability to continuously maintain and grow the core deposit base upon the change in ownership may, however, remains a monitorable," the rating agency added.

With an improved capital position, ICRA believes, IDBI Bank is now better placed to pursue growth.

Having said that, ICRA expects that incremental slippages could remain high, given the reasonably large overdue book amid the weak operating environment and certain other vulnerable exposures. While the bank maintains one of the highest provision coverage ratios on its stressed assets, the timing of recoveries from these could remain uncertain.

ICRA also maintained a 'Stable' outlook for the bank as it believes that  IDBI Bank will continue to maintain and improve upon its deposit base and will generate sufficient internal capital for meeting growth and for maintaining the desired cushion over the regulatory capital requirements.