Fitch downgrades Canara Bank's viability rating

Fitch downgrades Canara Bank's viability rating
Rating agency Fitch has now downgraded the viability rating of state-run Canara Bank by a notch to 'BB+' amid concerns over asset quality and higher cost of deposits.

"Canara Bank has higher risk concentration in the troubled infrastructure sector, including state electricity boards, and a weaker funding profile," Fitch said.

Viability rating, which is a key component of bank's issuer default rating, represents the capacity of the bank to maintain current operations and avoid failure.

Canara Bank's NPAs in large industries segment, as on September 30 2012, stood at Rs 1,462 crore as against Rs 522 crore as on September 30, 2011. Also the total NPAs went up to Rs 5,610 crore from Rs 3,838 crore during the same period.

Hit by the higher provisioning against bad loans, the net profit of the lender fell by 22.44 per cent at Rs 661 crore for three months ended September 2012. Net Interest Margin (NIM) of the bank also fell to 2.35 per cent during the quarter from 2.51 per cent during the year ago period.

Besides, the agency also re-affirmed the Long-Term Issuer Default Rating (IDR) of four major PSBs including State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BOB), Canara Bank (Canara) and Bank of Baroda (BoB) at 'BBB-'.

The reaffirmed IDR indicated that these banks have adequate support from the government.

Read more about: fitch, canara bank
Story first published: Friday, November 23, 2012, 10:30 [IST]
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