Bandhan Bank shares dive 4% after ICRA downgrades credit rating to ‘AA-‘
Source: Business Standard
With the IDFC buy, Kolkata-headquartered Bandhan group will gain an entry straightway into the top-10 club.
ICRA, however, reaffirmed its ‘A1+’ rating for Bandhan Bank’s certificate of deposits.
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In its rationale for the above ratings, ICRA said that the downgrade in the long-term ratings of Bandhan Bank reflects the sustained weakness in the emerging entrepreneur business (EEB) portfolio, which is likely to continue,given the concerns regarding borrower-level overleveraging in the sector.
ICRA noted that the bank’s gross stresspool (SMA1-1 & 2 in EEB portfolio and overall gross non-performing advances) has declined,though at a slower-than-anticipated pace and driven by significant write-offs in FY2023 and FY2024, leading to high credit costs.
Consequently, its profitability has remained subpar in relation to the pre-Covid-19 pandemic levels. Bandhan’s capital cushions have also declined as a result of bank’s interpretation of RBI’s notification leading to increase in the risk weights on certain exposures to 125 per cent, which was previously calculated at a risk weight of 75 per cent.
“In addition to affecting the capital cushions, this may pose challenges for growth or absorbing unexpected stress from the asset quality if internal capital generation remains weak. In addition, the bank’s profitability gets impacted by the absence of income from sale of priority sector lending certificates (PSLC) and continuing balances in the low-yielding Rural Infrastructure Development Fund (RIDF) deposits, though the same would mature in the coming years,” ICRA said in a note.
Share price history
Bandhan Bank’s share price has slipped 25.6 per cent over the last one year, compared to BSE Sensex’s rise of 26.8 per cent.
The company has a total market capitalization of Rs 30,407.08 crore. Its shares are trading at price to earnings valuation of 12.24 times, while having an earning per share of Rs 15.97.
At 2:08 PM, the stock price of the company fell 3.38 per cent to Rs 188.80 a piece on the BSE. By comparison, the BSE’s Sensex was down 2.14 per cent or 1,800 points to 82,466 level.
First Published: Oct 03 2024 | 2:16 PM IST
