Moody’s Lifts Ratings of Canara Bank, Bank of Baroda and PNB

Moody’s Ratings has upgraded the issuer ratings of Canara Bank, Bank of Baroda and Punjab National Bank to Baa3 with a stable outlook, citing a very high likelihood of government support if needed.

The agency said the upgrade to their baseline credit assessment and adjusted baseline credit assessment reflects changes in Moody’s capital ratio definitions and scoring calibration, along with an improvement in asset quality, capital and profitability at all three lenders.
Moody’s said it may upgrade the banks again if their Tier 1 capital to risk-weighted assets rises above 14% and their net income to tangible assets exceeds 1.3% on a sustained basis, provided other credit metrics stay steady.

A downgrade could follow if India’s sovereign rating is cut or if any of the banks see a multi-notch drop in their baseline credit assessment.

Separately, Moody’s affirmed all ratings and assessments of United Overseas Bank, noting updated ratio definitions for capital, funding and liquid resources, and highlighting the bank’s diversified business mix across markets.

The agency said it could lower UOB’s baseline credit assessment if problem loans rise above 3%, if its TCE to risk-weighted assets falls below 14.5%, or if net income to tangible assets drops below 0.8%.