Days after LIC infused capital and picked up 51% stake in IDBI Bank, Moody’s Investors Service has upgraded the lender’s long term foreign currency senior unsecured rating and its Dubai International Financial Centre (DIFC) Branch to Ba2 from B1, up by two notches.
The long term local and foreign currency bank deposit ratings of the lender was also upgraded to Ba2 from B1. IDBI Bank’s Baseline Credit Assessment is upgraded three notches up to b2 from caa1, Moody’s said, adding the outlook, where applicable, had been changed to positive from ratings under review.
“The upgrade reflects the improved solvency of the bank following the completion of a significant capital infusion,” Moody’s said, while referring to the capital infusion in the bank by Life Insurance Corporation of India, which now holds 51%.
On January 21, IDBI received ₹5,030 crore capital from LIC after receiving ₹14,500 crore in December.
“We estimate that as a result, IDBI’s CET1 ratio will increase by 10 percentage points, based on the bank’s risk weighted assets as of September 30, 2018. The capital infusion will enable the bank to increase provisions for bad loans, which when combined with stabilising asset quality, will result in lower credit costs and improve profitability in 2020,” the ratings agency said.
Moody’s said it expected that government support remained very high for the bank even though direct government ownership had declined.
“We expect that support will flow through LIC. LIC is 100% owned by the Government of India, and therefore the ultimate support provider to IDBI remains the Government of India,” it said.
