Fitch downs Vijaya Bank credit rating by one notch
By Ankit Sharma
May 31, 2012
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The Fitch Group, the international credit and bond rating company has downgraded the long term (LT) ratings of Vijaya Bank by one step. The Mangalore based bank, which was previously rated ‘Fitch AA(ind)' was downgraded to ‘FitchAA-(ind)'. Last month top three private banks of India were also downgraded by Moody's.

Vijaya Bank's Rs. 900 crore upper tier-2 loan has also been downgraded from FitchAA(ind) to FitchAA-(ind), and a lower tier-2 loan of Rs. 600 crore was also downgraded, which now stands at FitchA-(ind) down from FitchAA-(ind).

The ratings show lack of Fitch's lack of confidence in the bank's asset quality and mediocre capitalization. Another probability of the downgrade could be the bank's funding profile, which is weak compared to PSU banks.

The bank's performance has not been up to the mark in the last fiscal; the NPAs have increased from 2.56 to 2.93%, while the stressed assets have increased from 5% to 8% in the last fiscal.

The slippages are expected to increase with bank's exposure in troubled sectors like power distribution, infrastructure projects like rails and ports, commercial real estate, and iron and steel.

However, according to the Fitch, the bank's ‘outlook is stable'.


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