The stock was trading close to its 52-week low of Rs 147 touched on November 29, 2018 in intra-day deal.
“The downgrade reflects the quick credit migration (to sub-investment grade) in the bank’s certain group exposures. Ind-Ra expects some of these assets to slip into the non-performing category. The need to provide beyond Rs 2,100 crore of contingent provisions in FY19 and credit cost guidance of 1.25 per cent for FY20 in the event of inadequate or delayed resolution of these assets could keep the operating buffers and capital buffers under further pressure in the 15 per cent to 20 per cent growth scenario,” Ind-Ra said in rating rational.
It further added that the negative outlook reflected the downside risks to the agency’s estimates of profitability and capital buffers that could emanate from substantial delays in the resolution of certain stressed assets.
The agency said that the revised rating factors in the bank’s fourth-largest position in the private banking sector and appointment of a new chief executive officer (CEO), Ravneet Gill, with the stated strategy of focusing on multiple granular income streams and assets & liabilities that could take one-two years to show meaningful traction.
"The ratings also factor in the bank’s significantly lower capital buffers, limited ability to raise substantial equity capital, the bank’s relatively high proportion of bulk funding and asset-liability tenor mismatches compared to larger private sectors peers," it said.
Last week, the rating agency Icra had also downgraded the bank's tier-I and tier-II bonds and infrastructure debt on deterioration in the credit quality of large ticket borrowers.
In the past seven trading days, the stock has tanked 34 per cent from the level of Rs 237 - touched on April 26 - after the bank posted its first ever net loss of Rs 1,506 crore for the March quarter (Q4FY19). The surprise net loss was incurred after the provisions soared over nine times. It had posted a profit of Rs 1,179 crore in the year-ago period.
"In its recently declared earnings for Q4 FY2019, the bank reported a significant increase in (riskier) 'BB' and below rated advances, given the deterioration in the credit profile of some of its larger borrowers. The share of such 'BB' and below advances stood at 7.1 per cent of its advances as on March 31, 2019,” Icra said.