Moody's Investors Service has revised Central Bank of India's ratings outlook to ‘negative' from ‘stable' due to the bank's modest capital, weak asset quality and large exposure to troubled industries.
“We view the bank as being more vulnerable than its similarly-rated peers (D-), given its relatively riskier loan book, which includes a high proportion of loans to troubled industries, such as the power sector,” says Ms Beatrice Woo, Vice-President and Senior Credit Officer, Moody's, in a statement.
Central Bank reported a Tier 1 capital ratio of 7.77 per cent as of December 31, 2011, below the 8 per cent Tier 1 ratio that the Government wants public sector banks to maintain, said a Moody's statement.
The public sector bank's Tier 1 is lower than its peers; the system Tier 1 ratio average reaching 9.60 per cent, it added.
On the asset quality front, the bank's non-performing assets (NPA), as of December 31, 2011, reached a two-year high of 3.7 per cent of loans, and Rs 4,920 crore on an absolute basis.
In addition, restructured assets accounted for 7.4 per cent of loans, significantly above the estimated system average of 4.2 per cent, said Moody's.
Infrastructure loans
The rating agency has assessed that the country's sixth largest public sector bank has larger exposures to stressed sectors than the system average.
For example, infrastructure loans represented 21 per cent of loans against 15 per cent for the system. Within infrastructure, loans to the power sector accounted for 14 per cent.
The agency noted that the bank's provision coverage declined to 48.1 per cent in December 2011 from 70.3 per cent a year earlier.