Punjab & Sind Bank's asset quality deterioration to moderate: CRISIL

Decrease in slippages and higher recoveries to help state-owned lender, says agency

Asset quality deterioration at Punjab & Sind Bank (PSB) is expected to slow down as the state-owned lender decreases slippages and makes higher recoveries, according to CRISIL Rating.

The Delhi-based lender’s gross non-performing assets (NPA) were at 11.34 per cent in June 2022 (they were 12.17 per cent in March 2022 and 13.76 per cent in March 2021). The decline in NPA in fiscal 2022 was largely driven by higher upgrades and write-offs.

Its recoveries and upgradation stood at Rs 383 crore in the first quarter ended June 30, 2022 and it has guided for recoveries and upgradation of Rs 2,000 crore in Fy23.

CRISIL affirmed AA rating for PSB’s tier II bonds. The outlook on debt instruments was “negative” reflecting the bank's weak asset quality and profitability.

Gross NPA improved in fiscal 2022 and stood at 12.2 per cent in March 2022. The bank reported a profit of Rs 1,039 crore for fiscal 2022 (loss of Rs 2,733 crore in FY21) with a return on assets (RoA) of 0.9 per cent. However, the pace of improvement remains slower than expected, rating agency said.

The elevated level of NPAs is on account of slippages in large corporate accounts and subdued growth in loan book in previous years.

The rating continues to factor in the expectation of strong support from the majority owner, the Indian government, which held 98.25 per cent stake as of June 30, 2022.

PSB received Rs 5,500 crore as capital in fiscal 2021 and Rs 4,600 crore in FY22 from the government. In the past four fiscals, the government has infused around Rs 11,672 crore in the bank.

The bank’s tier-1 stood at 13.08 per cent in June 2022 (14.80 per cent as on March 31, 2022) and overall capital adequacy ratio (CAR) 16.79 per cent, as on June 30, 2022 (18.54 per cent as on March 31, 2022).