Moody's lowers Punjab National Bank

Moody's Investors Service said it downgraded the local- and foreign-currency deposit rating of Punjab National Bank to Ba1/NP from Baa3/P-3.

The agency also downgraded the bank's baseline credit assessment and adjusted baseline credit assessment to B1 from Ba3.

These actions conclude the review of the bank's ratings that Moody's initiated in February following the discovery of some fraudulent and unauthorized transactions at the bank, amounting to Rs. 144 billion in February and March.

The agency also downgraded the bank's foreign-currency issuer rating to Ba1 from Baa3, along with its counterparty risk assessment to Ba1(cr)/NP(cr) from Baa3(cr)/P-3(cr).

The outlook is stable.

Moody’s said the downgrades reflect the negative impact of the fraudulent transactions on the bank's standalone profile, particularly its capital position.

The downgrades also consider the weak internal controls and processes of the bank, given that the fraudulent transactions were undetected for a number of years.

The bank's weak earnings profile also will limit its ability to absorb the impact of the fraudulent transactions over the next 12 to 18 months, Moody's added.

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