BackCrisil lowers Bank of India’s long-term debt outlook to negative
Crisil expects that Bank of India's asset quality will remain under pressure in the medium term
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Mumbai: Rating agency Crisil Ltd on Friday lowered its rating outlook on the long-term debt instruments of Bank of India (BoI) to negative from stable, as it expected that the bank’s asset quality will remain under pressure in the medium term.
The rating agency, while changing the outlook, reaffirmed the rating of the bank at AAA.
BoI’s weak assets, as calculated by Crisil, were at 7.2% on 31 March, against 4.3% a year ago and are expected to remain high over the next few quarters, the rating agency said.
“BoI’s profitability as reflected in return of assets too declined to 0.3% in 2014-15 from 0.5% in 2013-14, and is expected to remain weak in 2015-16 given its high provisioning costs and continued pressure on its net interest margin (NIM) over the next few quarters," Crisil said in its report. NIM is the difference between the yield a bank earns from loans and what it pays on deposits. It’s a key measure of profitability.
However, the rating agency said the bank continues to enjoy government support and the lender is well established in the market with an adequate resource profile.
“Over the medium term, its ability to improve its profitability through higher net interest margins and by arresting credit costs will remain a key rating monitorable," the agency said.
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