Icra downgrades debt instruments of Central Bank of India

Domestic rating agency Icra today downgraded various debt instruments of Central Bank of India due to the continued losses it has incurred in the first nine month of the financial year 2016-17.
The rating agency has downgraded the lender's Rs 1,159 crore basel II lower tier II bonds to A+(negative) from AA-(negative) and also downgraded the rating for the Rs 2,285 crore basel II upper tier II bonds programme of the bank to A(negative) from A+(negative).
It has withdrawn the AA- (negative) rating outstanding for the Rs 700 crore lower tier II bonds programme of the bank as the instrument has been completely redeemed with no dues outstanding.

"The rating downgrades takes into account the continued weakness in the operating and financial performance of the bank as reflected in the continued losses during nine month of the financial year 2016-17," the agency said in a statement here today.
The bank has reported net losses of Rs 1,847 crore in the April-December period as against loss of Rs 1,418 crore in the same period last year.
It said sustained losses from the financial year 2015-16 to 2016-17 have resulted in weak capitalisation levels and solvency profile.

"Given the large quantum of immediate as well as future capital requirements under basel III regulations and relatively weak position in terms of ability to raise the capital, the outlook has been retained as negative," the agency said.

The bank's asset quality also remains weak despite significant recoveries, upgradations and write-offs seen in April-December period.
The gross NPAs increased to 14.14 per cent as on December 31, 2016 from 11.95 per cent as on March 31, 2016.
The bank received a capital infusion from the government in this fiscal of Rs 1,297 crore. It also raised an additional equity of Rs 157 crore through private placement with LIC in the third quarter.
"However, with significant losses in nine months, the bank's capitalisation profile remains weak with the capital to risk weighted asset ratio (CRAR), tier I capital ratio and CET ratio at 9.99 per cent, 7.87 per cent and 7.70 per cent respectively as on December 31, 2016 as against minimum regulatory requirement of 10.25 per cent, 8.25 per cent and 6.75 per cent respectively as on March 31, 2017," the rating agency said.

With limited resolution in stressed accounts and continued fresh slippages, the rating agency expects the bank's profitability to remain under pressure and consequently require sizeable capital by March 31, 2017 to meet the minimum regulatory levels.