IDBI Bank to raise Rs 1,500 cr via tier-I bonds

Public sector IDBI Bank today said it will raise Rs 1,500 crore by issuing tier I bonds.
"IDBI Bank proposes to issue an additional tier-I bond amounting to Rs 1,500 crore," it said in a BSE filing.
The bank said it will allot the bonds on August 30, 2016.
"Accordingly, the outlook on the long-term rating
continues to be negative and we are closely monitoring the bank's capitalisation profile and its efforts to raise fresh capital by March 31, 2017, which will be a key rating sensitivity," the rating agency said.
It said the bank's rating remains constrained by the continued stress on profitability and asset quality, slower pace of recovery of slipped accounts and the sharper than expected deterioration in profitability and asset quality indicators which have impacted the earnings and capitalisation profile of the bank.

The losses during the third quarter were also high on account of one-time items like reversal of unrealised interest income of Rs 725 crore on standard assets under SDR and S4A.

"In our opinion, the bank's earnings profile is likely to remain weak over the medium term given the high NPA generation rate, relatively elevated size of the standard restructured book and relatively high un-provided NPAs," the agency said.
The bank's asset quality has seen impairment in the last few quarters following the RBI's asset quality review (AQR) in the second half of the financial year 2015-16 and subsequently the continued slippages during the nine month of the fiscal 2016-17.

The bank's gross NPAs increased from 5.88 per cent level as on March 31, 2015 to 10.98 per cent as on March 31, 2016 and further to 15.16 per cent as on December 31, 2016, while the standard restructured advances remained elevated at near 6 per cent as on December 31, 2016.
Despite the limited growth in the bank's advances, weakening asset quality has resulted in an increase in risk weighted assets and further weakening of capitalisation as reflected by CET I capital levels of 7.24 per cent as on December 31, 2016 as against 7.98 per cent as on March 31, 2016.

Given the pressure on asset quality, and declining CET I levels, the bank's ability to prevent further slippages, increase resolution of stressed accounts and raise equity capital in the next few quarters will be key rating sensitivities, it said.