Fitch Ratings Affirm Union Bank and PNB: Stability and Government Support

Fitch Ratings upheld the ratings for Union Bank of India and Punjab National Bank at 'BBB-' with a stable outlook. Key factors include government support and improved risk profiles. The banks' viability and asset quality improved, reflecting positively on their financial metrics and earning potential.

Fitch Ratings has affirmed the ratings of Union Bank of India and Punjab National Bank (PNB) at 'BBB-' with a stable outlook. This decision reflects strong government backing, with the Indian government holding significant stakes of 75% in Union Bank and 70% in PNB, highlighting their systemic importance.

The ratings are bolstered by a supportive operating environment, improving asset quality, and robust funding and liquidity, according to Fitch. The agency upgraded the banks' viability ratings to 'bb-' from 'b+', pointing to ongoing improvements in risk profiles and financial performance.

Fitch also noted that India's economic growth will aid lenders in sustaining profitable business if associated risks are properly managed. Positive developments in both banks include greater loan diversification and reduced risk from unsecured retail loans, enhancing the outlook for both institutions in the medium term.

(With inputs from agencies.)