Moody's raises outlook for BoI, OBC and Union Bank to 'stable' on recap plan

NEW DELHI: Global rating agency Moody's Investors Service has changed the outlook to 'stable' from 'negative' for Bank of India ( BoI), Union Bank and Oriental Bank of Commerce ( OBC).

Moody's has also affirmed the standalone credit profiles or baseline credit assessments (BCA) of these three banks at ba3. Moody's said that the government's recent Rs 2.1 lakh crore recapitalisation plan is large enough to help improve the capitalisation levels of the banks.

The revision in the outlooks for BOI's, Union Bank's, and OBC's ratings to stable from negative, reflect Moody's view that the government's capital infusion plan alleviates some of the downside risks to their BCAs and ratings, it said.

"Prior to this rating action, the BCAs of these three banks were under pressure due to the deterioration in their asset quality, as well as Moody's expectation of pressure on their profitability, as they continued to build loan loss buffers. Furthermore, their capitalisation profile is somewhat weaker than other rated banks in India, and the ability to generate internal capital is limited."

"As such, the capital infusion plan — which is significantly higher than what was originally budgeted — will mitigate some downside risks. Moreover, their funding and liquidity levels remain stable and support their overall financial profiles," the rating agency said.

Meanwhile, the rating agency has affirmed the Baa3/P-3 local and foreign currency bank deposit ratings of the three Indian public sector banks.

For BOI, Moody's affirmed the senior unsecured MTN program rating at (P)Baa3 and the senior unsecured debt rating at Baa3 for debt issued from its London and Jersey branch. For Union Bank, Moody's has affirmed the senior unsecured MTN program rating at (P)Baa3 and the senior unsecured debt rating at Baa3 for debt issued from Union Bank's Hong Kong Branch, it said.