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New Delhi: State-owned Punjab & Sind Bank said in a regulatory filing on Thursday that "it has upgraded the Rating of Additional Tier I Bonds of Rs 1,000 crore from ICRA A- (Negative) to ICRA A (Stable) and has reaffirmed the rating of the Certificate of Deposits at ICRA Al+. The rating of the Additional Tier I Bonds has also been withdrawn as these bonds have been redeemed."
"Punjab & Sind Bank's established presence and branch network in North India along with its stable deposit base, strong liquidity coverage ratio (LCR) and excess statutory liquidity ratio (SLR) holdings in relation to the average net demand and time liabilities (NDTL) remain a strength. Furthermore, after the set-off of its accumulated losses against the share premium in August 2021, the bank’s distributable reserves (DRs) and its ability to service its Additional Tier I (AT-I) bonds have improved," the filing stated.
"Going forward, the performance of the residual potential stress book will remain a near-to-medium-term monitorable as it remains high in relation to the capital. This continues to be a key challenge as the bank's core operating profitability is likely to remain weak because of the sizeable share of non-earning assets (zero-coupon bonds (ZCBs) for recapitalisation by GoI) in the overall assets and the relatively higher cost of funds. This limits the ability to absorb credit provisions against operating profit. However, as these ZCBs were marked down on a fair value basis in Q4 FY2022 for inclusion in core capital, the discount on the face value of these bonds is likely to decline every year as they near maturity. This will aid the core capital of the bank even in a scenario of weak profitability," it added.
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