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IDBI Bank shares slump 9% after S&P Global Ratings places it on CreditWatch

Updated : August 28, 2019 11:28 AM IST

IDBI Bank shares slumped over 9 percent on Wednesday after the private lender's unsecured debt was put on 'CreditWatch with negative implications' by S&P Global Ratings.

At 9:45 am, the stock price plunged 8.97 percent to Rs 26.90 per share on the NSE.

Intraday, the share price slipped 9.30 percent to Rs 26.80.

IDBI Bank shares slumped over 9 percent on Wednesday after the private lender's unsecured debt was put on 'CreditWatch with negative implications' by S&P Global Ratings.

At 9:45 am, the stock price plunged 8.97 percent to Rs 26.90 per share on the NSE. Intraday, the share price slipped 9.30 percent to Rs 26.80.

The global rating agency in its report said, "We placed the ratings on 'CreditWatch' to reflect the uncertainty regarding IDBI's ability to meet its regulatory capital requirement over the next few months. The bank expects to raise capital from its majority shareholders — LIC [Life Insurance Corporation of India ] and the government of India before September 30, 2019, to meet the shortfall, but the quantum and timing of the capital infusion is uncertain, in our view."

It also added that raising capital from the market will be particularly challenging given IDBI's weak valuations. The bank is dependent on the Indian government and LIC for such capital to correct the breach.

"IDBI has a weak stand-alone credit profile of 'b-' and has been subject to the central bank's "prompt corrective action" since May 2017. Due to a string of losses brought about by substantial problem loans and associated high provisioning costs, the bank's financial performance has weakened in the past few years," the brokerage added.

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