ICRA Downgrades UCO Bank’s Bonds
UCO Bank’s bond issuances worth Rs 1,300 crore downgraded by ICRA
Domestic rating agency ICRA Ltd, on Tuesday, downgraded UCO Bank’s bond borrowing programmes worth Rs 1,300 crore.
In a statement, the rating agency said that it has downgraded a Rs 800 crore Tier II bond issue to A+ from AA- earlier. ICRA has also downgraded a Tier II bond issue worth Rs 500 crore to A from A-. The outlook on both these bond programmes remains negative, it added.
The ratings downgrade take into account UCO Bank’s weak operating and financial performance during Q4FY17 and in FY17 overall. Driven by consecutive years of losses during the last two fiscals, and a high level of non-performing assets (NPA), the capitalisation levels and solvency profile remain weak for the bank.ICRA Statement On UCO Bank
The rating downgrade also takes into account the weak outlook on UCO Bank’s profitability amid high NPAs and capital constraints.
At the end of financial year 2016-17, UCO Bank’s gross NPA ratio was at 17.13 percent, while its net NPA ratio was at 8.94 percent. The bank had reported a net loss worth Rs 1,850.7 crore for the year ended March 31, 2017.
“With the standstill clause being applicable on asset classification under various schemes on resolution of stressed assets, UCO has a large number of loans continuing to be classified as standard accounts. Hence the reported asset quality is likely to deteriorate further going forward,” ICRA said.
The bank was subjected to action under the Reserve Bank of India’s (RBI) prompt corrective action (PCA), last month. Being placed under the PCA would mean that the bank needs to strengthen its capital base and set aside higher provisions against bad loans, ICRA noted in its statement.
The ratings, ICRA said, continue to draw comfort from the government’s 76.67 percent shareholding in the bank and the strong franchise which translates into a healthy and stable deposits base.
