Ratings agency Fitch on Tuesday downgraded Punjab National Bank’s (PNB’s) viability rating — a parameter to measure creditworthiness — by a notch to ‘bb’ and reaffirmed ratings of nine other banks like State Bank of India, ICICI Bank and Bank of Baroda.
The agency said PNB’s viability rating (VR) has been downgraded to reflect the growing risk to the bank’s capital position from its mounting stock of stressed assets, which has risen at a faster rate than its capital replenishment.
Fitch said it expects capital buffers are unlikely to improve significantly even though the government is likely to inject capital into the bank in the current financial year. “The bank’s large stressed assets stock (is) potentially taking longer to resolve than that of its peers,” the rating agency said.
It explained that despite the fact that the rise in new bad loans has slowed in recent quarters and the pace of recoveries has been on the rise, PNB’s unreserved bad loans to equity remains high even after the capital injection of Rs1,730 crore.
“Fitch believes that the bank’s recovery could prove to be more protracted than other similar-sized peers because of these stressed assets,” it added. FE