 CRISIL ratings on Dena Bank (Q,N,C,F)* debt instruments reflect the need-based support that Dena Bank is likely to receive from the Government of India (GoI), its majority stakeholder and its significant proportion of low-cost deposits.
These rating strengths are, however, partially offset by the bank`s weak asset quality, modest capital adequacy and strained earnings profile. Further, the ratings on the bank` s perpetual Tier I bonds and upper Tier II bonds take into account the distinguishing features of the instruments, such as conditional debt servicing.
CRISIL has centrally factored in the bank`s current and projected capital adequacy and profitability.
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Rs.4.25 Billion Lower Tier II Bonds |
AA-/Stable (Assigned) |
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Rs.1.6 Billion Perpetual Tier I Bonds |
A/Stable (Reaffirmed) |
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Rs.4.5 Billion Lower Tier II Bonds |
AA-/Stable (Reaffirmed) |
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Upper Tier II Bonds Aggregating Rs.3 Billion |
A/Stable (Reaffirmed) |
In its ratings on Indian public sector banks (PSB) including Dena Bank, CRISIL factors in the high likelihood of systemic support from GoI in the event of distress.
CRISIL believes that GoI`s majority ownership creates a moral obligation on its part to support the PSBs, if the need arises. Dena Bank maintains a strong, stable and diversified resource profile, backed by a very high proportion of low-cost current and savings account (CASA) deposits -- at 39 % of total deposits as on March 31, 2008. The bank`s fortnightly average cost of deposits at 5.8 % for 2007-08 (refers to financial year, April 1 to March 31), was marginally lower than the estimated industry average of 6.1 %.
Shares of the company gained Rs 2.4, or 5.63%, to trade at Rs 45. The total volume of shares traded was 661,567 at the BSE (Friday). |
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