SBI, PNB, Bank of Baroda shares hit on Moody's, Fitch downgrade

Shares of State Bank of India (SBI) on Tuesday fell over 3 per cent in the late morning trade after global rating agency Moody's downgraded the country's largest bank.

The ratings agency had on Monday downgraded the senior unsecured debt and local currency deposit rating of country's largest bank SBI by a notch to 'Baa3' from 'Baa2', citing asset quality and recapitalisation concerns.

"A combination of increasing pressure on credit fundamentals and ongoing reliance on fiscally constrained government to maintain capital at levels desired by regulators argue for appropriateness of supported debt and deposit ratings at a level no higher than the sovereign," Moody's had said.

Reacting to the development, SBI shares opened the day on weak note and further tanked 3.29 per cent to Rs 1,598 on the Bombay Stock Exchange. On the National Stock Exchange, the stock lost 3.52 per cent to Rs 1,596.25.

Meanwhile, shares of Punjab National Bank (PNB) and Bank of Baroda (BoB), too, witnessed selling pressure after global rating agency Fitch downgraded viability ratings of the state-run firms by one notch to 'BB+' from 'BBB-' while retaining their long-term issuer default ratings at 'BBB-'.

On downgrading BoB, Fitch on Monday said, 50 per cent of its loan book (both onshore and offshore loans) is forex denominated which could be a greater source of instability to its credit profile given the recent currency volatility.

Downgrading the second largest public sector lender, Fitch said, "BoB's stressed assets are equivalent to 85 per cent of equity. While this is a better buffer than PNB's, this is unlikely to be maintained given the level of deterioration that has taken place."

"The downgrade to PNB's viability ratings reflects its already weak equity position and the expected further weakening of its asset quality profile from current levels, which means the state-run lender would take longer to bounce back even under a cyclical recovery," Fitch said.

Shares of PNB went down by 3.68 per cent to Rs 466.20 while BoB fell by 3.38 per cent to Rs 494.10 on the BSE.

With inputs from PTI