Rating agency ICRA has downgraded Corporation Bank ’s Rs 700 crore lower tier-II bonds rating by a notch to “AA-” from “AA” following a sharp deterioration of its asset quality to 15.5%.
The outlook on the long term rating is negative, reflecting the expected pressure on the bank’s overall credit profile as the asset quality is likely to remain weak in the medium term, the rating firm said.
The state-run bank’s gross non-performing assets ratio rose to 15.5% as on June 30 from 11.7% a quarter back while the provision coverage remained low at 31.5%.
“Given the current low provision coverage ratio, ICRA expects the bank’s credit costs to remains high in the near to medium term on account of both incremental slippages and ageing of current NPAs; thus, profitability and internal generation going forward would remain subdued,” the rating company said in a release.
The bank’s fresh NPA generation rate increased steeply from 5.9% in FY2017 to 16.4% (annualised) in the quarter to June on account of higher fresh slippages from large corporate accounts.
ICRA has however reaffirmed the bank’s short-term rating on Rs 30,000 crore of certificate of deposits.
The government had infused Rs 508 crore capital in FY2017 raising its stake in the bank to 71% from 67% last year.