Fitch downgrades PNB's viability rating two notches as key ratio plunges

Decline in bank's core capitalisation was due to sharp spike in bad loans, including $2.2 bn in fraudulent deals reported in Feb, and related increase in credit costs

Fitch Rating has downgraded the Viability Rating (VR) of public sector lender Punjab National Bank from “bb-" to “b” and maintained it on Rating Watch Negative (RWN). 

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, which was bigger than Fitch's expectation. 

The deterioration in PNB's 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. It resulted in large losses in