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Bank of Baroda's ratings unchanged following tap bond issuance

July 8, 2014

Moody's Investors Service said that the Baa3 rating of Bank of Baroda's (BOB) existing $750 million notes issued on 23 January 2014 remain unchanged following the announcement of a tap bond offering on these notes.

The rating outlook is stable. The tap bond offering has the same terms and conditions as the exiting notes, and is being issued from its London Branch. The Baa3 senior unsecured debt rating is based on BOB's ba2 baseline credit assessment (BCA) and the very high likelihood of systemic support in the event of a crisis.

BOB's standalone bank financial strength rating (BFSR) of D is equivalent to a BCA of ba2, reflecting the bank's: weak asset quality and capital metrics relative to other rated Indian banks and regional peers. It also takes into consideration its adequate earnings power relative to its domestic peers, its sound deposit franchise and comfortable liquidity position.

Nonetheless, Moody's believes that the probability of systemic support for BOB, if needed, is very high, given the bank's importance to the domestic banking system. BOB held a 7% share of total system deposits at 31 March 2014, giving it the second largest market share among commercial banks in India. The bank also has a close relationship with the government of India (Baa3 stable) -- which owns a 56.26 per cent stake in the bank -- as evidenced by the government's track record of capital infusions to the bank.

Moody's assessment of systemic support results in a two notch uplift of the bank's senior unsecured debt rating and local currency deposit ratings to Baa3 from BOB's BCA of ba2.

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Source: CPI Financial

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