BOB, BOI, Canara Bank, Union Bank slip as Moody’s downgrades deposit ratings

Shares of Bank of Baroda (BOB), Bank of India (BOI), Canara Bank and Union Bank of India traded lower in Monday’s trade after Moody's Investors Service on Friday downgraded the long-term local and foreign currency deposit ratings of these lenders to Ba1 from Baa3.

Canara Bank and Bank of India were down 1.16 per cent and 0.82 per cent at Rs 102.05 and Rs 48.15, respectively. Bank of Baroda and Union Bank of India were also traded 1.74 per cent and 1.02 per cent lower at Rs 45.10 and Rs 29.05, respectively.

The ratings agency also downgraded Baseline Credit Assessments (BCAs) of all the four lenders to B1 from Ba3. The outlook on the ratings of the four banks is negative.

“The BCA downgrades take into consideration rising risks to the banks’ asset quality as a result of the severe economic contraction, which will result in an increase in credit costs," Moody’s said.

It also added that increase in credit costs will hurt the bottomline and also strain the banks’ modest capitalisation and reversing recent improvements.

It affirmed Punjab National Bank's (PNB) long-term local and foreign currency deposit ratings at Ba1 and its BCA at B1 but changed its ratings outlook to negative from stable. Shares of PNB were up 0.74 per cent at Rs 33.85, while the benchmark BSE Sensex was down 0.23 per cent at 38,267.

Deepening economic slowdown exacerbated by the coronavirus outbreak will strain the standalone credit strength of the banks, Moody’s said in a release.

Prolonged financial stress among households, weak job creation and a credit crunch among non-bank financial companies will lead to a rise in non-performing loans, delaying the ongoing clean-up of banks’ balance sheets, it said.