Moody's Investors Service has downgraded ratings of four state-run banks citing deteriorating quality of loans following the coronavirus pandemic. The four government banks include Bank of Baroda (BoB), Bank of India (BoI), Canara Bank, and Union Bank of India (UBI). The creditworthiness of the four lenders was reduced to B1 from Ba3 earlier. The outlook of those four banks is negative.
However, the global ratings agency affirmed long-term local and foreign currency deposit ratings of Punjab National Bank (PNB) at Ba1 and its BCA at b1. Moody's changed PNB's ratings outlook to negative from stable.
"The economic shock from the coronavirus pandemic is exacerbating an already material slowdown in India's economic growth, weakening borrowers' credit profiles and hurting Indian banks' asset quality," Moody's said.
"PNB's financial metrics had been improving prior to the economic slowdown, which combined with the bank's good funding and liquidity mitigates the negative impact on its credit profile of deteriorating asset quality and profitability," it added.
Meanwhile, Moody's had recently downgraded Baseline Credit Assessment (BCA) of State Bank of India (SBI) to Ba2 from Ba1. The downgrade reflects ratings agency's view that SBI's asset quality and profitability will deteriorate on the back of economic shock from the coronavirus pandemic in an already slowing economy.
Moody's also downgraded SBI's foreign currency preferred stock non-cumulative MTN program rating to (P)B2 from (P)B1, and the rating of the preferred stock non-cumulative (Basel III compliant Additional Tier 1 securities) bond issued out of its DIFC branch to B2(hyb) from B1(hyb).