Singapore: Moody's Investors Service on Tuesday affirmed IndusInd Bank Ltd's domestic and foreign currency issuer ratings of Baa3/P-3.
At the same time, Moody's changed the outlook to negative from stable.
The affirmation of the rating is driven by the bank's strong buffers, both capital and profitability, which result in a strong ability to absorb asset quality stress, said Moody's.
The bank's core equity tier one ratio on December 31, 2019, after factoring in profits for the nine months stood at 13.6 per cent. Capital will be further boosted by around 80 basis points if the promoter shareholder group exercises its outstanding warrants.
Consequently, said Moody's, capital will remain a key credit strength.
However, Moody's revised the outlook to negative to account for the risk of further asset quality deterioration.
Over the last few quarters, the bank has seen a deterioration in its asset quality, particularly in the corporate segment. Tight refinancing conditions for borrowers were a key trigger for the crystallisation of non-performing loans (NPLs).
Refinancing conditions remain tight, especially for weaker borrowers. In particular, the bank has a relatively higher exposure to real estate compared to other banks (at around 8 per cent of its loan book on December 31, 2019).
While there have been no NPLs in this segment so far, this exposure to the property market remains a source of risk, given the broader stress in the real estate sector.
The bank could also be negatively impacted by the ongoing stress in the telecommunications sector, said Moody's.
IndusInd Bank reported total assets of ₹3.1 lakh crore at the end of Q3 FY20.
This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.