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Care Ratings upgrades rating on AT-1 bonds of Canara Bank

Capital Market 

Canara Bank said that Care Ratings has upgraded the rating of bank's Additional Tier-I (AT-1) bonds (Basel III) to 'CARE AA+; Stable' from 'CARE AA; Stable'.

The ratings agency has reaffirmed its rating on Tier-II bonds (Basel III) of the bank at 'CARE AAA; Stable'.

Care Ratings said that the ratings assigned to debt instruments of Canara Bank continue to derive strength from majority ownership by Government of India (GoI), its market position as third-largest Public Sector Bank (PSB) as on 30 September 2021, its established retail franchise with strong network in southern states of India and experienced management. The rating strengths are partially offset by relatively low CASA and modest asset quality levels.

Care has revised the rating of AT-I bonds of Canara Bank considering the strengthening in overall credit profile of the bank including improvement in capital cushions over minimum regulatory requirement, improvement in profitability and improvement in the distributable reserves position.

The revision in the ratings assigned to debt instruments of Canara Bank consider the setting off accumulated loss amounting Rs 18,495.30 crore against share premium reserve in Q2 FY22 which improved the amount of distributable reserves available for AT-1 coupon payment and the improvement in capitalization levels supported by fresh equity infusion of Rs 2,500 crore in H1 FY22 (refers to the period 1 April to 30 September).

Canara Bank is a Bengaluru-based public sector bank. As per directive from Ministry of Finance, GOI for amalgamation of Syndicate Bank (SB) into Canara Bank the merger has become effective from 1 April 2020. Currently, Canara Bank is the third-largest PSB as on 30 September 2021, GOI is the majority shareholder holding 62.93% stake in the bank followed by LIC of India holding 8.83% as on 30 September 2021.

The state-run bank's net profit surged 199.86% to Rs 1,332.61 crore on 2.59% increase in total income to Rs 21,331.49 crore in Q2 FY22 over Q2 FY21.

The scrip rose 0.26% to currently trade at Rs 214.15 on the BSE.

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(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

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First Published: Thu, November 25 2021. 10:43 IST