| Cooperatieve Rabobank U.A. | ||
| Rating reaffirmed at 'CRISIL A1+ ' | ||
| Rating Action | ||
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| 1 crore = 10 million | ||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL A1+’ rating on the Rs 1000 crore certificates of deposit programme of Cooperatieve Rabobank U.A .India, CRUA India operations (referred to herein as Rabobank India).
This factors in S&P Global Ratings' (S&Ps') action on June 24, 2021 of revising its outlook on Cooperatieve Rabobank U.A., CRUA Netherland (here and after referred to as Rabobank Netherland), along with other Dutch banks, from 'Negative' to 'Stable' while reaffirming the ratings at 'A+/Stable/A-1'. This was on account of anticipated economic rebound, the ramp-up in vaccinations, continuous government and ECB’s support which is expected to wind down only gradually. Also, Rabobank Netherland’s strong domestic franchisee, and global positioning in food and agriculture continues to help credit profile. The pressure on capitalisation and risk position has receded. The stable outlook reflects S&P Global Ratings' expectation that, over the next 24 months, Rabobank Netherland will gradually restore its profitability on the back of the macroeconomic recovery.
The rating continues to be centrally based on the 'A+/Stable/A-1' counterparty ratings of S&P Global Ratings' (S&P) on Rabobank Netherland. The ratings on Rabobank Netherland reflect the bank’s prioritisation of long-term customer franchise growth over short-term returns leading to predictable strategy and revenue and its clearly defined medium-term strategy focusing on strong domestic franchise and financing global food and agriculture business. The rating also factors in its market leadership in the Netherlands, with a track record of strong performance in the country’s residential mortgage space. These strengths are partially offset by continuous need to adapt the business model to regulatory changes (particularly to those in the Basel framework), elevated loan impairments expected in the next two years due to the pandemic resulting in weak profitability, and high, though reducing, reliance on wholesale funding.
The rating on Rabobank India reflects the expectation of strong support from Rabobank Netherland, and adequate capitalisation. These strengths are partially offset by modest asset quality and earnings.
The nation-wide lockdown to contain the spread of Covid-19 impacted operational activity across the country. Rabobank India offered moratorium to a few borrowers. Sustained economic recovery is a key monitorable given the localised restrictions in a few states following the second wave of the pandemic which could exert pressure on asset quality. Additionally, any change in the payment discipline of borrowers can affect delinquency. While the branch focuses on sectors such as food and agriculture which are relatively shielded, asset quality and the consequent impact on the earnings profile will continue to be closely monitored.
Rabobank India offered one-time restructuring, as permitted under the Covid-19 Regulatory Package of the Reserve Bank of India (RBI). Three accounts accounting for Rs 276 crore, have been restructured as on date. |
Analytical Approach The rating on the certificate of deposit programme of Rabobank India is centrally based on S&P’s counterparty ratings of ‘A+/Negative/A-1’ on Rabobank Netherland. |
Key Rating Drivers & Detailed Description Strengths:
Weaknesses:
However, these two accounts were restructured subsequent to the closure of fiscal 2021, post which gross NPA (proforma) reduced to 7.1% and net NPAs (proforma) to 3.5%. As on date, three accounts were restructured accounting for Rs 276 crore.
Net profit was Rs 2.2 crore in fiscal 2021 from a loss of Rs 50.9 crore in the previous fiscal, mainly due to lower credit costs. It made provisions of Rs 51 crore in fiscal 2021 as against Rs 80 crore in the previous fiscal. Consequently, return on assets (RoA) improved to 0.04% from negative 0.8%.
In the current challenging macro environment, the ability to maintain low credit cost will remain a key monitorable. |
Liquidity: Superior Liquidity is comfortable, with liquidity coverage ratio of 222% as on March 31, 2021, much higher than the regulatory requirement. Excess statutory liquidity stood at Rs 1,310 crore (~46% of net demand and time liabilities) as on that date. As on April 15, 2021, there was a positive cumulative asset liability mismatch in all the buckets. Moreover Rabobank India has access to funding lines from the head office. |
Rating Sensitivity factors Downward factors:
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About the Bank Rabobank India is the wholesale banking and international retail banking division of Rabobank Netherland, carrying out business in and outside the Netherlands. Rabobank Netherland is one of the largest banking organisations in the Netherlands, with consolidated assets of EUR 632.3 billion as on December 31, 2020 ([1]Rs 56.4 lakh crore). Net profit was EUR 1.1 billion (Rs 9,816 crore) for the year through December 31, 2020 Rabobank India received the branch banking operations licence from the RBI on March 24, 2011, and commenced operations in July 2011. It received Rs 600 crore from the head office as initial capital. Rabobank Netherland infused an additional Rs 620 crore in fiscal 2016 taking the total infused capital to Rs 1,220 crore as on March 31, 2021.
The India operations supplement Rabobank Netherland’s presence by offering the complete suite of banking products. Rabobank India offers short and medium-term lending products, trade financing products, transactional banking services, working capital financing, liquidity management products, foreign exchange, and other hedging solutions as permitted by RBI from time to time.
Scale of lending operations remains small, with advances of Rs 2,410 crore and total assets of Rs 5,155 crore as on March 31, 2021 (Rs 2,622 crore and Rs 6,337 crore, respectively as on March 31, 2020). [1] Exchange rate as on December 31, 2020, is 1EUR=89.24 INR
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Key Financial Indicators
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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