Fitch Ratings has downgraded state-run Vijaya Bank's national Long-Term (LT) rating to 'Fitch AA-(ind)' from 'Fitch AA(ind)'.
However, the bank's outlook is stable, the rating agency said.
Fitch has also downgraded Vijaya Bank's Rs900 crore lower tier-2 subordinated debt to 'Fitch AA-(ind)' from 'Fitch AA(ind)' and its Rs600 crore upper tier 2 subordinated debt to 'Fitch A-(ind)' from 'Fitch AA-(ind)', a statement said.
The downgrade reflects continued deterioration in Vijaya's funding profile, which is weak compared to most Indian government banks, it said.
The ratings also reflect Fitch's expectations of continued weakening in the bank's asset quality and moderate capitalisation, it added.
Fitch noted that Vijaya Bank's proportion of stressed assets rose sharply in FY12 to 8% from 5% in FY11, with non-performing loans (NPLs) increasing to 2.93% (FY11: 2.56%) and 2.6% of loans were restructured during the year.
The proportion of stressed assets may rise further in view of bank's high exposure to troubled sectors such as power generation, electricity distribution companies, roads and ports, commercial real estate and iron and steel, Fitch said.
The agency also noted that the bank's provision coverage on NPLs (FY12: 41.9%) is low and inadequate to absorb increased losses, especially when its restructured assets attract only 2% provisioning.
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However, the bank's outlook is stable, the rating agency said.
Fitch has also downgraded Vijaya Bank's Rs900 crore lower tier-2 subordinated debt to 'Fitch AA-(ind)' from 'Fitch AA(ind)' and its Rs600 crore upper tier 2 subordinated debt to 'Fitch A-(ind)' from 'Fitch AA-(ind)', a statement said.
The downgrade reflects continued deterioration in Vijaya's funding profile, which is weak compared to most Indian government banks, it said.
The ratings also reflect Fitch's expectations of continued weakening in the bank's asset quality and moderate capitalisation, it added.
Fitch noted that Vijaya Bank's proportion of stressed assets rose sharply in FY12 to 8% from 5% in FY11, with non-performing loans (NPLs) increasing to 2.93% (FY11: 2.56%) and 2.6% of loans were restructured during the year.
The proportion of stressed assets may rise further in view of bank's high exposure to troubled sectors such as power generation, electricity distribution companies, roads and ports, commercial real estate and iron and steel, Fitch said.
The agency also noted that the bank's provision coverage on NPLs (FY12: 41.9%) is low and inadequate to absorb increased losses, especially when its restructured assets attract only 2% provisioning.
....more info