Moody’s slashes PNB rating, says bank needs up to ₹13,000 crore in this fiscal
Rating agency Moody’s Investors Service Monday said Punjab National Bank (PNB) will need ₹12,000-13,000 crore in 2018-19 to meet regulatory requirements, while downgrading its rating.
“This estimate takes into account the aging basis provisions for the NPLs (non-performing loans), the deferred provisions for the fraud, investment losses and employee benefit expenses as well as a reduction in risk weighted assets,” the rating agency said.
As per Reserve Bank of India rules, banks must maintain common equity tier-I ratio at 8%, including capital conservation buffer, by March 2019.
Moody’s downgraded PNB’s local and foreign currency deposit rating to Ba1/NP from Baa3/P-3, and also downgraded bank’s baseline credit assessment and foreign currency issuer rating.
“The rating downgrade also reflects the weak internal controls and processes of the bank, given that the fraudulent transactions were undetected for a number of years. The bank’s weak earnings profile -- as seen by its large stock of non-performing loans (NPLs) and the associated credit costs -- will limit its ability to absorb the impact of the fraudulent transactions over the next 12-18 months,” Moody’s said.
Last week, PNB reported a ₹13,417-crore loss for the Janu- ary-March period, the largest quarterly loss posted by an Indian lender, reeling under fraud, tighter loan classification norms and losses in its bond portfolio.
Rating agencies have downgraded PNB citing capital concerns following a $2 billion fraud involving companies linked to jewellers Nirav Modi and Mehul Choksi. Fitch’s local arm India Ratings on Friday cut PNB’s longterm issuer rating to ‘IND AA+’ with a negative outlook from ‘IND AAA’.
According to India Ratings, the downgrade also reflects the fall in PNB’s common equity tier-I ratio below what is prescribed by the regulator at March-end.
“PNB could continue to struggle with its core capitalisation level, both on an immediate and sustained basis, in the absence of a significant capital infusion from the government of India,” India Ratings said.
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