| Punjab and Sind Bank | ||||
| Rating outlook revised to 'Stable'; Rating Reaffirmed | ||||
| Rating Action | ||||
| ||||
| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||
| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Analytical Approach For arriving at the ratings, CRISIL Ratings has considered the standalone business and financial risk profiles of P&SB. CRISIL Ratings has also factored in the strong support the bank is expected to receive from its majority owner, the GoI, both on an ongoing basis and in the event of distress. |
Key Rating Drivers & Detailed Description Strengths: Expectation of strong support from GoI The rating continues to factor in the expectation of strong government support, both on an ongoing basis and in case of distress. This is because GoI is both majority shareholder in public sector banks (PSBs), and the guardian of India's financial system. Stability of the banking sector is of prime importance to the government, given its criticality to the economy, strong public perception of sovereign backing for PSBs, and severe implications of any PSB failure, in terms of political fallout, systemic stability, and investor confidence. The majority ownership creates a moral obligation on GoI to support PSBs, including P&SB.
The bank’s tier-1 and overall CAR stood at 14.5% and 17.2%, respectively, as on June 30, 2023, (14.30% and 17.10%, respectively, as on March 31, 2023).
Weakness: Weak asset quality, albeit improving Asset quality has been under stress, with GNPAs at 12.17% as on March 31, 2022, and 13.76% as on March 31, 2021. However, it improved in fiscal 2023 to 6.97%, and stood at 6.80% as on June 30, 2023. The improvement was largely driven by higher upgradations and write-offs during the fiscal. In absolute terms, GNPAs decreased to Rs 5,464 crore as on June 30, 2023 (Rs 5,648 crore as on March 31, 2023, and Rs 8,565 crore as on March 31, 2022). Slippages reduced to 1.4% in fiscal 2023 compared to 3.4% in fiscal 2022. The pace of deterioration in asset quality is expected to slow down over the medium term with decrease in slippages and higher recoveries owing to pick-up in economic activities.
Under the Reserve Bank of India’s August 2020 and May 2021 resolution framework for Covid-19-related stress, the bank implemented restructuring on around 2.8% of gross advances as on June 30, 2023. The performance of the restructured portfolio and the ability of the bank to manage collections and asset quality will remain key monitorables.
Weak, albeit improving, earnings profile Earnings have remained impacted by weak asset quality. The bank reported a profit of Rs 1,313 crore for fiscal 2022 against a profit of Rs 1,039 crore for the previous fiscal. Profitability has been majorly supported by lower credit cost and improved NIM during fiscal 2023. The bank witnessed reversal in credit cost in fiscal 2023 compared with 0.1% for the previous fiscal. The provision coverage ratio (PCR) remained healthy and stood at 75% as on March 31, 2023, and 72.7% as on June 30, 2023.
The bank’s pre-provisioning profits (as a proportion of average assets) remained at a similar level of 1.1% in fiscal 2023 compared with the previous fiscal; however, it remains lower than industry average. For the quarter ended June 30, 2023, P&SB reported a profit of Rs 153 crore. Profitability was impacted by a one-time charge of Rs 42 crore on profits related to wage revisions.
Ability to improve asset quality, and hence profitability, will remain a key monitorable. |
Liquidity: Strong Liquidity coverage ratio was 113.6% for the quarter ended March 31, 2023, and was higher than the regulatory requirement. The excess statutory liquidity ratio was Rs 2,553 crore (2.31% of net demand and time liabilities) as on same date. Liquidity also benefits from access to systemic sources of funds such as the liquidity adjustment facility from the RBI, access to the call money market, and refinance limits from sources such as the National Housing Bank and National Bank for Agriculture and Rural Development. |
Outlook: Stable CRISIL Ratings believes P&SB will continue to benefit from the strong government support. The bank's asset quality and profitability, though, will remain under pressure over the medium term. |
Rating Sensitivity Factors Upward Factors
Downward Factors
|
About the bank P&SB is a relatively small PSB, founded in 1908 in New Delhi. The bank had 1,543 branches and 802 ATMs as on June 30, 2023, primarily in northern India. GoI's ownership stood at 98.25% as on June 30, 2023.
For fiscal 2023, the bank reported a profit of Rs 1,313 crore and total income (net of interest expenses) of Rs 3,913 crore, against a profit of Rs 1,039 crore and total income (net of interest expenses) of Rs 3,611 crore previous fiscal.
For the quarter ended June 30, 2023, net profit was Rs 153 crore and total income (net of interest expense) was Rs 916 crore, against a net profit of Rs 205 crore and total income (net of interest expense) of Rs 824 crore for the corresponding period previous fiscal. |
Key Financial Indicators
|
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
|
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Criteria Details
|