Fitch Ratings has downgraded the Viability Rating (VR) of Punjab National Bank to ‘b’ from ‘bb-’ and maintained negative ratings. The two-notch downgrade to PNB’s VR is a reflection of the significant deterioration in its standalone credit profile, mainly due to a drop in its core capital ratio that was bigger than Fitch’s expectation, the rating agency said.
Rise in NPLs
Fitch said the deterioration in its core capitalisation was caused by a sharp increase in its non-performing loans (NPLs), including the $2.2 billion in fraudulent transactions reported in February 2018, and the related increase in credit costs, which resulted in large losses in the financial year ended March 2018 (FY18).
“The decline also highlights management’s weaker execution and previous underwriting and oversight gaps, which the bank has already started taking steps to address,” Fitch added.