AsianHeadlines

CARE has assigned A+ rating to the proposed Rs 2 billion Tier II Subordinated Bond issue of Karnataka Bank (KBL). The bonds would be redeemed at par at the end of 10 years from the date of allotment. Also, CARE has retained the A+ rating assigned to the outstanding Tier II Subordinated Bond issue of Rs 1.5 billion of KBL. Instruments with this rating are considered to offer adequate safety for timely servicing of debt obligations and carry low credit risk.

The ratings factor in KBL`s long standing track record, good profitably parameters, comfortable capital adequacy marked by high Tier I capital and good technology orientation characterised by 100% Core Banking Solution (CBS) implementation. The ratings are constrained by relatively small size of the bank, strong regional orientation, high deposit cost partly attributable to the low proportion of low cost deposits (LCDs), higher NPA additions & increase in restructuring of standard assets in the recent past and challenging operating conditions characterised by increasing interest rate environment, decline in credit growth & pressure on spreads. source

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