Moody's affirms PNB's foreign currency rating

Rating agency Moody’s has affirmed Punjab National Bank (PNB)’s foreign currency long-term issuer rating ‘Baa2’, owing to good recurring earning power, a comfortable capital base and favourable liquidity conditions.

The rating agency also affirmed its D+ bank financial strength rating for the Delhi-based public sector lender.

PNB’s global local currency deposit rating is Baa2/P-2. It saw a two-notch rating uplift from Ba1 BCA, given the rating agency’s systemic support assumptions, Moody’s Investor Services said in a statement. However, it lowered its mapping of the baseline credit assessment from Baa3 to Ba1. All the ratings carry a stable outlook.

Vineet Gupta, vice-president and senior analyst, Moody’s, said the affirmation of the issuer rating and the stable outlook reflected the bank’s recent core profitability indicators, especially the net interest margin. He added the ratings also pointed to good recurring earnings power.

The bank’s comfortable capitalisation and liquidity levels also aided the affirmation of its issuer rating, he said.

PNB’s baseline credit assessment was lowered to capture anticipated pressure on asset quality.

PNB, like other Indian banks, would continue to be challenged by the prevailing operating environment --- high inflation and interest rates. These are resulting in a slowdown in economic growth and are reducing the repayment ability of corporate borrowers.

Such an environment also poses risks to asset quality, as seen in the recent increase in the bank’s non-performing loans and the rising level of restructured loans, the agency said.