<p>"The outlook revision reflects Fitch's expectations that structural challenges facing the bank from its aggressive expansion in recent years are unlikely to improve its overall credit profile in the short-to medium-term," Fitch said in a statement.<br /><br />It said the bank expects to grow at a slower rate in the current fiscal after the aggressive 81 per cent loan growth in 2010-11. Also, its capitalisation is weakening from low internal capital generation.<br /><br />"The ratings may be downgraded if there is a significant deterioration in capitalisation, or there are any signs of deterioration in the bank's funding. A rating downgrade may also result from any stresses on asset quality that may lead to a sharp drop in earnings or net losses," Fitch said.<br /><br />It said that since 2008-09 fiscal, Dhanlaxmi Bank's operating performance has been impacted by substantial loan growth, which is being increasingly funded through wholesale deposits, and from large investments in infrastructure and other resources.<br /><br />"Amid low net interest margins (NIMs) and a significantly high operating cost base, profitability remains weak," Fitch said, adding that the bank's asset quality has remained stable.<br /><br />"However, moderating economic growth and high interest rate environment may impact its loan portfolio, a large part of which is not seasoned," Fitch noted.<br /><br />Besides, Fitch has affirmed National Long-Term rating and the Rs 170 million lower Tier-II debt of the bank at 'BBB(ind)'.</p>
<p>"The outlook revision reflects Fitch's expectations that structural challenges facing the bank from its aggressive expansion in recent years are unlikely to improve its overall credit profile in the short-to medium-term," Fitch said in a statement.<br /><br />It said the bank expects to grow at a slower rate in the current fiscal after the aggressive 81 per cent loan growth in 2010-11. Also, its capitalisation is weakening from low internal capital generation.<br /><br />"The ratings may be downgraded if there is a significant deterioration in capitalisation, or there are any signs of deterioration in the bank's funding. A rating downgrade may also result from any stresses on asset quality that may lead to a sharp drop in earnings or net losses," Fitch said.<br /><br />It said that since 2008-09 fiscal, Dhanlaxmi Bank's operating performance has been impacted by substantial loan growth, which is being increasingly funded through wholesale deposits, and from large investments in infrastructure and other resources.<br /><br />"Amid low net interest margins (NIMs) and a significantly high operating cost base, profitability remains weak," Fitch said, adding that the bank's asset quality has remained stable.<br /><br />"However, moderating economic growth and high interest rate environment may impact its loan portfolio, a large part of which is not seasoned," Fitch noted.<br /><br />Besides, Fitch has affirmed National Long-Term rating and the Rs 170 million lower Tier-II debt of the bank at 'BBB(ind)'.</p>