S&P Downgrades Union Bank On Weak Asset Quality

S&P lowered its long-term issuer credit rating on Union Bank of India to 'BB+' from 'BBB-'.
S&P lowered its long-term issuer credit rating on Union Bank of India to ‘BB+’ from ‘BBB-‘.
Mumbai: International ratings agency Standard & Poor’s (S&P) on Friday lowered its long-term issuer credit rating on Union Bank of India (UBI) to ‘BB+’ from ‘BBB-‘, citing weak asset quality, but retained a stable outlook on the state-run lender.

“We are lowering our long-term issuer credit rating on UBI to BB+ from BBB- and also the short-term issuer credit rating to ‘B’ from ‘A-3’ due to its poor asset quality,” S&P said in a note.

“We downgrade Union Bank because we expect the bank’s asset quality to remain weak over the next 12 months, following a deterioration over the past few quarters,” S&P Global Ratings credit analyst Nikita Anand said.

“Accordingly, we have lowered our assessment of the bank’s stand-alone credit profile to ‘BB’ from ‘BB+’,” she added.

The agency, however, said it sees high likelihood of the government continuing to provide timely and sufficient support to the city-based bank.

“Our view of the likelihood of extraordinary government support is based on our assessment of the bank’s very strong link with, and very important role to, the government. The rating is thus one notch higher than the bank’s stand-alone credit profile,” it said.

The rating outfit said it expects Union Bank’s profitability to remain modest over the next 12 months, mainly due to elevated credit costs.

[“source-ndtv”]