CARE downgrades Punjab & Sind Bank's tier-II bonds

Asset quality expected to remain vulnerable due to significant exposure to power and infrastructure sector

CARE Ratings has downgraded Punjab & Sind Bank’s tier-II bonds from ‘AA+’ to ‘AA’ due to a weak earnings profile and a rise in the bank’s stressed assets portfolio. It is expected asset quality will remain vulnerable due to significant exposure to the power and infrastructure sectors.

The rating was also hit by the relatively small size of operations and the low share of current account and savings account deposits, CARE said in a statement. The Union government’s majority stake in the bank, as well as adequate capitalisation levels, remained positive.

Continued support from the government and the bank’s ability to improve its asset quality and sustain profitable operations were key rating sensitivities.

As on March 31, 2013, the Union government held 79.86 per cent stake in the bank.

As on September 30, 2013, the bank’s gross non-performing asset (NPA) and net NPA ratios stood at 4.12 per cent and 2.98 per cent, respectively. The bank reported a capital adequacy ratio of 11.12 per cent, according to Basel- III norms.

During FY13, the bank registered net interest income of Rs 1,641 crore, while total income was Rs 7,757 crore. For the first half of FY14 (April-September 2013), profit after tax stood at Rs 165 crore, while total income was Rs 3,981 crore.