Mumbai: The scam hit Punjab National Bank has suffered major face loss as Fitch Ratings, a global rating agency has downgraded its viability from ‘bb’ to ‘bb-’(bb minus).
“The downgrade follows our assessment of how losses resulting from fraudulent transactions reported in February 2018 will affect the bank’s financials, including its earnings and core capitalisation. The downgrade also reflects the bank’s risk controls, which, we think, are weaker than what we had previously believed, since the fraud was undetected for several years and acquired a large scale of $2.2 billion,” Fitch said.
Interestingly, the global rating agency has maintained the rating on rating watch negative (RWN), while other ratings of the bank are unaffected by such downgrading move of the public sector bank.
“We believes that losses related to the fraud will act as a drag on PNB’s overall credit profile over the next year or two and will immediately increase the bank’s non-performing loan (NPL) ratio and credit costs. The regulatory requirement to provide for 100% of fraud-related losses will increase provisioning requirements,’’ it said. Fitch expected the bank to report losses in the financial year ending March 2018 (FY18) and most of FY19. It further expected the gross NPL ratio to rise by at least 3% of loans by FY19. “However, profitability may improve faster than our expectations in FY19 if some large NPL accounts are resolved during the course of the year. Loan-loss cover may not see large deterioration given the provisioning requirements,’’ it.
