Growth, earnings, asset quality to be top priorities for Indian Bank

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Indian Bank MD & CEO Padmaja Chunduru

Chennai-based public sector lender Indian Bank, which has completed one year of amalgamation of Allahabad Bank with itself, on Thursday said the three priorities, going forward for the combined entity, would be growth, earnings and asset quality.

Indian Bank, which has been registering business and profit growth during the last three quarters of FY 21, said the bank has emerged as one of the best banks in the country and would put customer satisfaction on the top of its focus areas.

After launching the bank’s new vision and mission statement, Padmaja Chunduru, MD & CEO, Indian Bank, said the bank’s primary focus will be on customer service and satisfaction. On the bank’s capital adequacy, she said Indian Bank was one of the highest capitalised PSU banks in the country and hence had no requirement to seek fund infusion from the central government, referring to the Centre’s decision to infuse capital into four public sector banks.

Chunduru said the triple A ratings with stable outlook that the bank has received recently from both Crisil and CARE Ratings – the best ratings in the country for a bank – would help the bank to raise funds at cheaper rates and from many more investors. This should also help the bank emerge as a favourite pick for the investors, she said, adding that the team has already been started working towards that direction.

V VShenoy, executive director, Indian Bank, said employees are the most important and valuable assets in providing insights into customer experience and act as brand ambassadors. Indian Bank commits to foster excellence through a journey of growth, individual development and robust employee experience and Indian Bank’s HR mission aims for this, he said.

K Ramachandran, executive director, Indian Bank, while launching Chatbot named ADYA (Automated Dost for Your Assistance) said that it is a on-premise, artificial intelligence-based tool that facilitates customers to access information instantly from the corporate website.

Imran Amin Siddiqui, executive director, Indian Bank, launched IB – Smart Office which is a platform for employees for processing office notes and letters digitally across all administrative offices and branches. He said that IB – Smart Office is a complete green initiative of the bank which assists in cost-saving on printing and stationery, improved turn around time, increased productivity of employees, better control and compliance through various reports.

On the occasion, the bank’s new tagline “Aapka Apna Bank – Har Kadam Aapke Saath” in Hindi and “Your own Bank – Always with You” in English was also launched.

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S&P Global affirms Indian Bank’s ‘BBB-‘ rating

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S&P does not assign equity credit to additional tier 1 instruments issued by Indian public sector banks due to uncertainty over their ability to absorb losses on a going-concern basis.

S&P Global Ratings on Thursday affirmed its ‘BBB-‘ long-term and ‘A-3’ short-term issuer credit ratings on Indian Bank while pointing out that the outlook on the long-term rating was negative. The agency said it has removed the ratings from CreditWatch, where they were placed with negative implications on June 26, 2020.

S&P said it affirmed the ratings because it expects Indian Bank to be able to absorb a moderate deterioration in its asset quality over the next 12 months and benefit from faster-than-expected economic recovery in India. “Indian Bank’s performance following its merger with Allahabad Bank has been better than we expected,” it said.

According to S&P’s estimate, Indian Bank’s credit costs will stay high at 2.2%-2.9% over fiscals 2021 and 2022. The bank’s reported NPL ratio declined to 9.9% of total loans as of September 30, 2020, from 11.4% as of March 31, 2020.

In the absence of the Supreme Court ruling barring banks from classifying any borrower as nonperforming, Indian Bank’s NPL ratio would have been higher by about 55 basis points, but still lower than in previous quarters.

The improvement in the asset quality was helped by a six-month moratorium on loan repayment and financial savings of borrowers.

S&P said the management expects 2%-3% of the loans to get restructured under the central bank’s one-time restructuring window. On the corporate side, these are mostly loans from the hotels and tourism sectors, which were hard hit by the pandemic.

“We see a high risk of Indian Bank’s RAC ratio falling below 5% on a sustained basis if the bank’s credit costs or credit growth are higher than our forecast, especially if the bank is unable to raise commensurate common equity capital. Indian Bank’s RAC ratio was 5.2% as of September 30, 2020,” it said.

S&P does not assign equity credit to additional tier 1 instruments issued by Indian public sector banks due to uncertainty over their ability to absorb losses on a going-concern basis.

The negative outlook reflects the agency’s view of a likely weakening in Indian Bank’s capitalisation and asset quality owing to Covid, while it sees a one-in-three chance of a downgrade over the next 12-18 months.

“We will lower the rating by a notch if Indian Bank’s RAC ratio falls below 5% on a sustained basis or the bank’s NPL ratio or credit costs increase sharply and we expect them to remain at that level or increase. The RAC ratio could fall below 5% if Indian Bank’s credit growth or provisioning is higher than our forecast, particularly in the absence of capital infusion. We would revise the outlook to stable if the bank’s RAC ratio can sustain above 5% and its asset quality remains comparable to similarly rated peers,” S&P said.

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