Moody's: Canara outlook negative

Moody's Investors Service said it changed the outlook on Canara Bank's Baa2 foreign-currency perpetual non-cumulative subordinated obligations and A2 global local-currency long-term deposit rating to negative from stable.

The agency believes that Canara Bank's baseline credit assessment has come under pressure because of its relatively low level of tier 1 capital compared with that of similarly rated Indian banks, which translates into a weaker equity cushion to absorb any loan losses going forward.

Following the recent change in the credit outlook for the Indian banking system to negative from stable, Moody's expects the asset quality positions of all Indian commercial banks to come under increasing pressure as the real economy weakens under the influence of the global economic downturn.

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