New Delhi, May 21 : Moody’s Investors Service has downgraded the local and foreign currency deposit rating of multi-crore fraud hit Punjab National Bank (PNB) to Ba1/NP from Baa3/P-3, a statement said here on Monday.
At the same time, Moody’s has downgraded the bank’s baseline credit assessment (BCA) and Adjusted BCA to b1 from ba3.
“These actions complete Moody’s review of the bank’s ratings initiated on February 20, 2018, following the bank’s announcement of the discovery of some fraudulent and unauthorized transactions amounting to Rs 144 billion ($2.2 billion) in February and March 2018,” the statement said.
Moody’s has also downgraded PNB’s foreign currency issuer rating to Ba1 from Baa3. And, Moody’s has downgraded the Counterparty Risk Assessment (CRA) of the bank to Ba1(cr)/NP(cr) from Baa3(cr)/P-3(cr). However, Moody’s maintained the “ratings outlook” of the bank as “stable”.
The downgrade of the bank’s BCA and ratings reflects the negative impact of the discovery of a number of fraudulent transactions on the bank’s standalone profile, particularly its capital position. 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 statement said.
“The bank’s weak earnings profile — as seen by its large stock of nonperforming 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. Furthermore, provisions relating to the fraudulent exposures will largely offset the benefit the bank will receive from the Indian government’s (Baa2 stable) capital infusion plan,” said Moody’s.
Punjab National Bank posted a net loss of Rs 13,417 crore for the fourth quarter (January-March) of 2017-18. The company had posted a net profit of Rs 262 crore for the corresponding quarter in 2016-17. The gross non-performing assets (NPA) of the company stood at 18.38 per cent for the fourth quarter of 2017-18 compared to 12.53 per cent during the corresponding quarter in 2016-17. The bank has made provisions and contingencies worth Rs 20,353.10 crore for the fourth quarter while it was Rs 4,466.68 crore for the October-December quarter of 2017-18. (IANS)