Fitch puts India's Federal Bank on evolving watch

Fitch Ratings said it has placed the A+ national rating on the subordinated debt of India-based The Federal Bank Ltd. on Rating Watch Evolving. The rating action follows the announcement that the bank is considering a merger with Lord Krishna Bank Ltd.

The move is expected to add to Federal Bank Ltd.'s existing branch network in southern India and somewhat extend its reach in northern India and help consolidate Federal Bank's position as the largest "old" private bank in South India, but is unlikely to help it match the quality of income or product delivery capabilities of some of the larger and better rated "new" private banks, Fitch said.

Fitch said it in discussions with the bank's management and will continue to monitor the impact of the merger on the bank's growth opportunities as well as its profitability, capital ratios and asset quality, which is reflected in the Rating Watch Evolving status.

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