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CARE Ratings has assigned ‘CARE AA; Stable’ Rating in respect of The Federal Bank Limited’s ‘Basel III – Tier II Bonds’ of Rs. 500 Crores (Size of Issue).
Tier II Bonds under Basel III are characterized by a ‘Point of Non-Viability’ (PONV) trigger due to which the investor may suffer a loss of principal. PONV will be determined by the Reserve Bank of India (RBI) and is a point at which the bank may no longer remain a going concern on its own unless appropriate measures are taken to revive its operations and thus, enable it to continue as a going concern. In addition, the difficulties faced by a bank should be such that these are likely to result in financial losses and raising the Common Equity Tier I capital of the bank should be considered as the most appropriate way to prevent the bank from turning non-viable.
The rating assigned to the proposed Tier II Bonds (under Basel III) of The Federal Bank Limited (FBL) factors in the bank’s long standing track record of operations of the bank, growth in franchise with established depositor base in South India which also enables the bank generate fee-based income, increasing diversification of business into other states of the country, comfortable capitalization levels, experienced management team, adequate profitability and operating efficiency metrics and comfortable liquidity profile. The rating remains constrained by moderate asset quality and borrower as well as geographic concentration in the advance’s portfolio.
Shares of Federal Bank Ltd. was last trading in BSE at Rs. 83.65 as compared to the previous close of Rs. 82.3. The total number of shares traded during the day was 466083 in over 1537 trades.
The stock hit an intraday high of Rs. 84.2 and intraday low of 82.05. The net turnover during the day was Rs. 38751507.
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