Shares of private lender IndusInd Bank fell 3 percent on Wednesday after Moody's Investors Service downgraded its outlook on the bank to ‘negative’ from ‘stable’ on concerns over a further deterioration in asset quality.
The global rating agency has affirmed IndusInd Bank’s rating at 'Baa-3/P-3'. Baa3 denotes the lowest rating in investment grade on long-term corporate obligation which carries moderate risks.
The scrip plunged 3.07 percent to touch intraday low of Rs 1,252.50 apiece on the BSE.
Moody’s noted that the bank has seen a deterioration in asset quality, particularly in the corporate segment over the last few quarters. Tight refinancing conditions for borrowers were a key trigger for the crystallisation of nonperforming loans (NPLs).
The refinancing conditions remain tight, especially for weaker borrowers, Moody’s said in a note.
IndusInd Bank has a relatively higher exposure to real estate compared to other banks at around 8 percent of its loan book as on December 31, 2019, the agency added.
“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,” Moody’s said.
Further, it said that the bank could be negatively impacted by the ongoing stress in the telecommunications sector.
Moody's does not have any particular governance concern for IndusInd Bank and views the bank’s risk management framework as consistent and commensurate with its risk appetite.
Given that the outlook is negative, Moody's will unlikely upgrade the bank's ratings over the next 12-18 months.
Moody's could revise the bank's outlook to stable, if the bank maintains its NPL ratios at current levels over the next 12-18 months, while demonstrating a decrease in credit costs to the levels seen before the financial year ended 31 March 2019.
At 11:25 am, shares of IndusInd Bank were trading 0.43 percent lower at Rs 1,286.70 on the BSE.
