IndusInd Bank falls 3% after Moody's downgrades bank's outlook to negative

Shares of IndusInd Bank slipped 3 per cent to Rs 1,252 on the BSE in Wednesday's early morning trade as rating agency Moody’s downgraded the private lender’s outlook to negative from stable on account of the risk of further asset quality deterioration. The stock was 5 per cent away from its 52-week low of Rs 1,192, touched on October 11, 2019.

“Over the last few quarters, the bank has seen deterioration in its asset quality, particularly in the corporate segment. Tight refinancing conditions for borrowers were a key trigger for the crystallization of nonperforming loans (NPLs),” Moody's Investors Service said.

Refinancing conditions remain tight, especially for weaker borrowers. In particular, the bank has a relatively higher exposure to real estate compared to other banks (at around 8 per cent of its loan book on December 31, 2019. While there have been no NPLs in this segment so far, this exposure to the property market remains a source of risk, given the broader stress in the real estate sector.

The bank could also be negatively impacted by the ongoing stress in the telecommunications sector, it said.

Moody's said it could revise the bank's outlook to stable, if the bank maintains its NPL ratios at current levels over the next 12-18 months, while demonstrating a decrease in credit costs to the levels seen before the financial year ended 31 March 2019.

At 09:29 am, IndusInd Bank was trading 1 per cent lower at Rs 1,278 and was the top loser among the S&P BSE Sensex stocks. In comparison, the benchmark index was up 0.84 per cent or 346 points at 41,563. A combined 1.69 million shares have changed hands on the counter on the NSE and BSE so far.

Bombay Stock Exchange - BSE