BWI: Brickwork Ratings Assigns “BWR AAA+” for Punjab National Bank’s Innovative Perpetual Debt Instrument (IPDI) Issue of INR 700 crore or INR 7 billion

Press release from Business Wire India
Source: Brickwork Ratings
Friday, October 09, 2009 05:48 PM IST (12:18 PM GMT)
Editors: General: Consumer interest, Economy; Business: Advertising, PR & marketing, Banking & financial services, Business services, Financial Analyst, Stock exchanges
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Brickwork Ratings Assigns "BWR AAA+" for Punjab National Bank's Innovative Perpetual Debt Instrument (IPDI) Issue of INR 700 crore or INR 7 billion
IPDI Issue Rating: BWR AAA+ ; Outlook: Stable

Bangalore, Karnataka, India, Friday, October 09, 2009 -- (Business Wire India) -- Brickwork Ratings has assigned BWR AAA+ (Pronounced BWR Triple A Plus) for Punjab National Bank's (PNB) Innovative Perpetual Debt Instrument (IPDI) issue of INR 700 crore or INR 7.00 billion. Brickwork ratings' 'BWR AAA+' stands for an instrument that is considered to offer the BEST credit quality in terms of timely servicing of debt obligations. The rating factored consistently strong performance of the bank, comfortable capital adequacy, low leverage, efficient cost structure, higher operating profits, strong low cost deposits, improving asset quality, well diversified credit portfolio, healthy earning assets, and the Government of India's ownership stake.

Despite economic slow down in the domestic market and financial crises in the international market, the bank has performed very well during the financial year 2009. As a result, PNB has posted a robust growth in total business coupled with improving assets quality during FY 09. With a growth rate of 27.50%, the bank has reached INR 3644.63 billion total business as on 31st March 2009. The bank managed to achieve this result by suitably modifying its existing products and services and leveraging technology platform.

PNB's total deposits grew by 26.01% to reach a level of INR 2097.60 billion in FY09. Similarly, the bank's advances increased by 29.45% to INR 1547.03 billion. PNB's low cost deposits mix, CASA at 38.82% was highest among its peers, mainly driven by the bank's aggressive savings and current account marketing during the year and also branch expansion in rural and semi urban areas. As a result, the bank's CASA was 6.85% higher than its peers' average of 31.87%. Brickwork calculates leverage that assesses bank's capital adequacy with reference to both on and off balance sheet exposures. PNB's lower leverage of 18.81 is positive compared to its peer group's 22.81 as on 31st March 2009.

With appropriate credit risk management practices, the bank's asset quality has been improving over the years. As a result, the bank's gross NPAs had come down to 1.77% as on 31st March 2009 from 2.74% for the same period a year ago. Similarly, the net NPAs declined to 0.17% in FY09 from 0.64% in FY08. The declining trend in the non-performing assets was seen not only in percentage terms, but also in absolute level. The bank's gross NPAs stood at INR 27.67 billion in FY09, lower by a significant 16.63% compared to INR 33.19 billion in FY08. The net NPAs had come down significantly by 64.98% in FY09 to INR 2.64 billion in FY09 from INR 7.54 billion in FY08. While containing the fresh slippages, the bank also provided better provisions of 90.47% for non-performing assets during the year. Specialized recovery branches, account-specific strategies, and continuous monitoring have yielded appreciable results with the bank making cash recovery of INR 13.68 billion in FY09. More over, the bank's gross and net NPAs were 6 and 51 bps lower than that of peers' gross (1.83%) and net NPAs (0.68%).

During FY 09, the bank's capital adequacy ratio stood at 14.03% under Basel II, which is 52 bps higher than its peers' average of 13.51%. Similarly, Tier I capital at 8.98%, which is 72 bps higher than its peers' average of 8.26%. Overall, the bank's capitalization has been stable and should enable the bank to sustain its growth momentum in the near term.

While economic activity seems to be picking up, Indian banking industry is gearing for a notable operational growth. Nonetheless, continuous monitoring and timely corrective action would be necessary as the crises have not been fully blown over and weakness felt earlier could have repercussion on growth, margins etc. for some more time to come. While leveraging the banking technology, the banks will also resort to cross-selling and up-selling of various products and services to increase their revenues.

PNB's improving assets quality, earnings, wide spread distribution channel, strong base of advances and deposits, comfortable capital adequacy, and efficient risk management practices are positive factors, which are expected to help the bank to maintain its current growth momentum. As such, Brickwork has assigned "Stable" Outlook for the bank's proposed issue.

Copyright ©, 2009, Brickwork Ratings.

Brickwork Ratings has assigned the rating based on the information obtained from issuer and other reliable sources, which are deemed to be accurate. Brickwork has taken considerable steps to avoid any data distortion; however, it does not examine the precision or completeness of the information obtained. And hence, the information in this report is presented "as is" without any express or implied warranty of any kind. Brickwork does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by Brickwork should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses incurred by users from any use of this report or its contents.


CONTACT DETAILS
Dr. A. Suresh Kumar, Lead Analyst Contact, Brickwork Ratings, 1-860-425-2742, suresh.kumar@brickworkratings.com
Vikas Thakur, Co-Analyst Contact, Brickwork Ratings, 1-860-425-2742, vikas.t@brickworkratings.com
Anitha G, Media Contact, Brickwork Ratings, 1-860-425-2742, media@brickworkratings.com
K N Suvarna, Senior V.P - Business Development, Relationship Contact, Brickwork Ratings, 1-860-425-2742, kn.suvarna@brickworkratings.com

KEYWORDS
CONSUMER, ECONOMY, MARKETING, BANKING, BUSINESS SERVICES, Financial Analyst, STOCK EXCHANGES

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