PNB’s viability rating hit

Fitch places the bank on watch after the fraud comes to light

GN Bureau | February 20, 2018


#PNB Fraud   #Economy   #Banking   #Punjab National Bank   #PNB Scam   #Nirav Modi  


The large-scale fraud perpetrated on Punjab National Bank has hit its rating. Fitch Ratings has placed its Viability Rating of 'bb' on Rating Watch Negative (RWN). The rating firm said it will resolve the Rating Watch “once more clarity emerges on the extent of control failures and the impact on PNB's financial position”.

“At this stage, Fitch does not view this event to have an impact on PNB's Support Rating Floor (BBB-) due to the bank's high systemic importance as the second-largest state-owned bank. We believe that the state's propensity to provide extraordinary support to PNB remains high, subject to the sovereign's ability, which is captured in India's sovereign rating of 'BBB-',” it said in a release.

The RWN reflects the possibility of a downgrade of PNB's Viability Rating following the detection of a large fraud in one of the bank's branches amounting to $1.8 billion. While the exact financial impact from this event is still being ascertained, it has raised questions on both internal and external risk controls as well as the quality of management supervision considering that the fraud went undetected for several years.

PNB's asset quality and capital parameters continue to be weak but have shown some stability since Fitch's rating action in June 2017. For the nine months of financial year to December 2018 PNB's non-performing loan (NPL) ratio eased to 12.1% (12.5% FYE17) while its CET1 ratio improved to 8.05% (7.9%). Profitability continued to be weak but the bank raised Rs 50 billion ($770 million) in fresh equity from the capital markets in 3QFY18. PNB is also likely to get an additional Rs 54 billion ($850 million) from the government by end-March 2018 under the government's recapitalisation agenda.


 

Comments

 

Other News

Land digitisation and India

The World Bank’s Ease of Doing Business report 2019 ranks India at 166 out of 190 countries in ‘Registering Property’, lower from last year’s ranking of 154. This, in spite of a 53-place jump in India’s overall ranking in the last two years alone!  

“India has huge potential to improve the account usage”

Financial inclusion can fuel the economic growth of a country. In conversation with Rahul Trivedi, Dr Pawan Bakhshi, of the Bill & Melinda Gates Foundation, talks about its India specific programmes which aim to broaden the reach of low-cost digital financial services for the poor. Edited excerpts:

Easing birthpangs

Most of us have paid at least one visit to a health facility. It is easy to identify quality care when we receive it – an attentive doctor, a responsive team of health workers, adherence to hygiene and safety protocols, and so on. Unfortunately, not everyone has access to high quality care, a situati

Eliminating tuberculosis within a generation

Published ahead of World TB Day (24 March 2019), The Lancet Commission on Tuberculosis estimates that there are significant financial benefits of reducing TB mortality. With the country shouldering one-fourth of the global burden and a predominant number of patients accessing care in the private sector, th

India a year unhappier

India is unhappier than ever before. The United Nation`s World Happiness report 2019 has ranked India at the 140th position from the previous 133 in 2018, dropping seven spots in just a year and 23 positions since 2015.   Out of the total 156 countries that were covered, India`s

On the line

Releasing a booklet on the railways achievements in the last five years, railways minister Piyush Goyal may have painted a rosy picture, but that does not subtract from its many troubles, chief among which is its worsening operating ratio.   The ratio is of working expenses to tr



Current Issue

Current Issue

Video

CM Nitish’s convoy attacked in Buxar

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter