By Jindal Haria

India Ratings and Research (Ind-Ra) has placed Canara Bank’s (Canara) Long-Term Issuer Rating of ‘IND AAA’ on Rating Watch Negative (RWN). The instrument-wise rating actions are as follows:

Instrument Type

Date of Issuance

Coupon Rate (%)

Maturity Date

Size of Issue (billion)

Rating/Rating Watch

Rating Action

Basel III Tier 2 instrument^

 

 

 

INR54

IND AAA/RWN

Placed on RWN

Basel III AT1 bonds^

 

 

-

INR40

IND AA/RWN

Placed on RWN

Certificate of deposits

 

 

7-365 days

INR300

IND A1+

Affirmed


^Details in annexure

KEY RATING DRIVERS

Ind-Ra has placed the ratings of Canara on RWN following the finance ministry’s announcement dated 30 August 2019 on the proposed amalgamation of Canara with Syndicate Bank (‘IND AA’/Rating Watch Evolving) with Canara being the absorbing bank post amalgamation.

 

As the announcement will be followed by multiple approvals at various levels including the boards of these banks, the agency has placed Canara’s ratings on RWN. The key reasons for placing the ratings on RWN are the scale of the mergers and the potential integration-related challenges that may be encountered in the process; the banks may not be ready within the stipulated time (as may be determined later). The RWN indicates that the rating may be affirmed or downgraded. Ind-Ra expects to resolve the RWN on the outcome of the merger and the availability of first set of consolidated quarterly financial results.

 

For Ind-Ra’s views on latest announcement on amalgamation or public sector banks, click here.
 


COMPANY PROFILE

Canara has a pan-India presence, with the third-largest network of 6,315 domestic branches in FY19. 60% of its branches are based in rural and semi-urban areas, supporting the government of India’s initiative of banking for all.

 

FINANCIAL SUMMARY

 

Particulars

FY19

FY18

Total assets (INR billion)

6,947.5

6,168.9

Total equity (INR billion)

361.8

356.0

Net income/loss (INR billion)

3.47

-42.22

Return on average assets (%)

0.1

-0.7

Equity/assets (%)

5.21

5.77

Capital adequacy ratio (%)

11.9

13.2

Source: Canara, Ind-Ra

 


RATING HISTORY

Instrument Type

Current Rating/Rating Watch

Historical Rating/Outlook

Rating Type

Rated Limits (billion)

Rating

10 June 2019

26 October 2018

3 August 2017

Issuer rating

Long-term

-

IND AAA/RWN

IND AAA/Stable

IND AAA/Stable

IND AAA/Stable

Basel III Tier 2 instrument

Long-term

INR54

IND AAA/RWN

IND AAA/Stable

IND AAA/Stable

IND AAA/Stable

Basel III AT1 bonds

Long-term

INR40

IND AA/RWN

IND AA/Stable

IND AA/Stable

IND AA/Stable

Certificate of deposits

Short-term

INR300

IND A1+

IND A1+

 -

 -


ANNEXURE

Instrument Type

ISIN

Issue Size (billion)

Date of allotment/issuance

Outstanding (billion)

Coupon Payment Frequency

Coupon rate/Interest Rate (%)

Principal Payment Due Dates

Instrument Maturity Date

BASEL III Tier II bonds 2015-16 (Series I)

INE476A09264

INR15

31 December 2015

INR15

Annual

8.4

31 December 2025

31 December 2025

BASEL III compliant Tier II bonds 2016-17

INE476A08050

INR30

27 April 2016

INR30

Annual

8.4

27 April 2026

27 April 2026

BASEL III Tier II bonds 2015-16 (Series II)

INE476A08043

INR9

7January 2016

INR9

Annual

8.4

7 January 2026

7 January 2026

Total utilised

INR54

 

 

 

 

 

 

Total unutilised

Nil

 

 

 

 

 

 

BASEL III compliant additional Tier 1

INE476A08035

INR15

5 March 2015

INR15

Annual

9.55

Perpetual Bond - Call Option-
5 March 2025

Perpetual

BASEL III compliant additional Tier I

INE476A08068

INR10

13 December 2016

INR10

Annual

8.6

Perpetual Bond - Call Option-
13 December 2021)

Perpetual

Total utilised

INR25

 

 

 

 

 

 

Total unutilised

INR15

 

 

 

 

 

 



COMPLEXITY LEVEL OF INSTRUMENTS

For details on the complexity levels of the instruments, please visit https://www.indiaratings.co.in/complexity-indicators.

SOLICITATION DISCLOSURES

Additional information is available at www.indiaratings.co.in. The ratings above were solicited by, or on behalf of, the issuer, and therefore, India Ratings has been compensated for the provision of the ratings. 

Ratings are not a recommendation or suggestion, directly or indirectly, to you or any other person, to buy, sell, make or hold any investment, loan or security or to undertake any investment strategy with respect to any investment, loan or security or any issuer.

ABOUT INDIA RATINGS AND RESEARCH

About India Ratings and Research: India Ratings and Research (Ind-Ra) is India's most respected credit rating agency committed to providing India's credit markets accurate, timely and prospective credit opinions. Built on a foundation of independent thinking, rigorous analytics, and an open and balanced approach towards credit research, Ind-Ra has grown rapidly during the past decade, gaining significant market presence in India's fixed income market. 

Ind-Ra currently maintains coverage of corporate issuers, financial institutions (including banks and insurance companies), finance and leasing companies, managed funds, urban local bodies and project finance companies. 

Headquartered in Mumbai, Ind-Ra has seven branch offices located in Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata and Pune. Ind-Ra is recognised by the Securities and Exchange Board of India, the Reserve Bank of India and National Housing Bank. 

India Ratings is a 100% owned subsidiary of the Fitch Group.

For more information, visit www.indiaratings.co.in.

DISCLAIMER

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Analyst Names

  • Primary Analyst

    Jindal Haria

    Director
    India Ratings and Research Pvt Ltd Wockhardt Towers, 4th floor, West Wing Plot C-2, G Block. Bandra Kurla Complex Bandra (East), Mumbai 400051
    +91 22 40001750

    Media Relation

    Namita Sharma

    Manager – Corporate Communication
    +91 22 40356121