Ind-Ra affirms Punjab National Bank at ‘AAA’/Stable; Rates Tier II Bonds

The ratings reflect PNB’s high systemic importance, a large franchise with a pan-India presence, healthy capitalization, adequate and stable funding base, and liquidity, and its provision coverage ratio being lower than the peer group.

Oct 14, 2021 03:10 IST India Infoline News Service

India Ratings (Ind-Ra) has assigned an 'IND AAA/Stable' rating to Rs2,000cr Tier 2 Bonds (under Basel III) of Punjab National Bank (PNB) while affirming its Long-Term Issuer Rating at 'IND AAA/ Stable'.

The credit rating agency also affirmed the company’s Short-Term Issuer Rating at 'IND A1+' and ratings on existing Basel III Tier 2 Bonds, & Senior Infrastructure Bonds at 'IND AAA/Stable' and Additional Tier 1 Bond at 'IND AA/Stable'.

Punjab National Bank trade ended at Rs42.40 per piece up by Rs0.95 or 2.29% from its previous closing of Rs41.45 per piece on the BSE.

“The ratings continue to reflect PNB’s high systemic importance, and hence, the high probability of support from the government of India (GoI; 73.15% stake as of June 2021), if required.

The ratings reflect PNB’s high systemic importance, large franchise with a pan-India presence, healthy capitalisation, adequate and stable funding base and liquidity, and its provision coverage ratio being lower than the peer group. While slippages for PNB remained elevated in FY21, it declined on a yoy basis during the year; nevertheless, it would remain a key monitorable over the near term,” company shared Ind-Ra’s rating rationale.

It further said, the AT1 bonds’ rating reflects the bank’s strong standalone credit profile, along with its ability to service coupons and manage the principal write-down risk on its debt capital instruments.

To arrive at the rating, Ind-Ra has considered the discretionary component; coupon omission risk; and the write-down/conversion risk as key parameters. The agency recognises the unique going-concern loss absorption features that these bonds carry and differentiates them from the bank’s senior debt, factoring in a higher probability of an ultimate loss for investors in these bonds. Ind-Ra envisages coupon deferrals and principal write-down risk as a remote possibility in view of the bank’s adequate revenue reserve buffers.

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