Punjab & Sind Bank’s basel III tier II bonds reaffirmed at IVR AA/Stable by infomerics

Infomerics Ratings has reaffirmed the IVR AA/Stable rating on Punjab & Sind Bank’s ₹237.30 crore Basel III Tier II bonds, supported by strong sovereign backing, improved profitability, and sustained gains in asset quality.

Punjab & Sind Bank has received a reaffirmation of its credit rating from Infomerics Ratings for its Basel III–compliant Tier II Bond Series XV. The rating agency has maintained the IVR AA/Stable outlook on the ₹237.30 crore bond issue, reflecting continued government ownership, strengthened capitalization, and notable improvements in the bank’s financial and asset quality metrics.

Rating Rationale

Infomerics cited the bank’s status as a government-owned entity as a key rating strength, with the Government of India holding a 93.85% stake as of December 31, 2025. This majority ownership underpins expectations of sustained sovereign support, particularly in terms of capital infusion and operational stability.

The rating also factors in the bank’s adequate capitalization and its consistent progress in reducing stressed assets over the past few years.

Capital Adequacy and Funding

As of December 31, 2025, Punjab & Sind Bank reported a CET-1 ratio of 15.28%, Tier-I CAR of 15.28%, and an overall capital adequacy ratio of 16.83%. During FY25, the bank further bolstered its capital base through a ₹1,219 crore equity infusion via the QIP route and an additional ₹3,000 crore raised through infrastructure bonds.

Financial Performance Improvement

The bank delivered a strong financial turnaround in FY25. Net profit rose sharply by 70.6% to ₹1,015.83 crore, supported by higher income, expanding advances, and improved margins. Total income increased by 19.5% year-on-year, while net interest margin improved to 2.85%, up 40 basis points from the previous year.

Asset Quality Gains

Asset quality indicators showed sustained improvement. The gross NPA ratio declined to 2.60% as of December 31, 2025, compared to 3.38% at the end of FY25 and significantly lower than levels seen in earlier years. Net NPAs improved to 0.74%, while the provision coverage ratio strengthened to 92.23%, reflecting prudent risk management and lower credit costs.

Constraints and Outlook

Despite these positives, the rating remains constrained by the bank’s moderate resource profile, with a CASA ratio of 31.02%, and its relatively modest scale with total business of around ₹2.5 lakh crore. Geographic concentration, particularly in northern India, also continues to limit upward rating movement.

Infomerics expects the Stable outlook to be maintained, supported by continued government backing, steady growth in advances, controlled credit costs, and further improvement in asset quality. Sustaining profitability while managing growth-related risks will remain key monitorables going forward.