New Delhi: Global rating agency Moody's on Wednesday revised downward the ratings outlook for Central Bank of India to 'negative' from 'stable' on account of weak asset quality.
"The revised outlook considers that Central Bank of India's comparatively modest capital level and weak asset quality will be further pressured in the current difficult operating environment," Moody's said in a statement.
"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," it said.
The bank reported a Tier 1 capital ratio of 7.77 per cent as of December 31, 2011. The level was below the 8 per cent Tier 1 ratio that the government of India has committed to maintaining in public sector banks and lower than its peers; the system Tier 1 ratio average reaching 9.60 per cent, it said.
Importantly, it said, such a level for its Tier 1 capital ratio does not provide a sufficient cushion to absorb the potentially higher credit costs coming from its deteriorating asset quality or to support growth.
On the asset quality front, it said, the bank's non-performing assets (NPA), as of 31 December 2011, reached a 2-year high of 3.7 per cent of loans and Rs 4,920 crore on a absolute basis.
In addition, restructured assets accounted for 7.4 per cent of loans, significantly above our estimated 4.2 per cent for the system.