Fitch places Bank of Baroda's viability rating on 'rating watch negative'

Fitch Ratings Wednesday placed Bank of Baroda's viability rating (VR) on rating watch negative (RWN), post the government's proposal to merge the lender with Vijaya Bank and Dena Bank.

The bank's VR currently stands at 'bb'.

The action comes a day after another international rating agency Moody's affirmed ratings of Bank of Baroda, and kept outlook on all the ratings as stable.

"The VR has been placed on rating watch negative (RWN) as we believe the merger could have a potentially negative impact on BoB's financial position depending on the extent of deterioration that is visible after the merger in key financial parameters such as asset quality and core capitalisation," Fitch Ratings said in a report.

The RWN on the VR reflects the potential negative effects of the merger in the near term, while the benefits from scale, cost and business synergies would be visible only in the medium-to-long term, it added.