Altman Z-Score: 8 Indian Financials in Distress

MUMBAI: A solvency screen from FairStock.ai has put eight Indian financial stocks in the Altman Z-score distress zone below 1.8. The list includes Life Insurance Corporation of India and seven public sector banks: Central Bank of India, Canara Bank, Bank of Baroda, Punjab National Bank, Bank of India, UCO Bank, and Union Bank of India. The screen, run on public filings, shows public sector banks with debt-to-equity ratios from 10.39 to 14.67. [LICI](/stock/LICI) (NSE: LICI) posted the lowest Z-score at -0.83 despite a reported debt-to-equity ratio of 0.00. That gap is the first thing investors should question. A zero debt-to-equity figure doesn't mean LICI has no liabilities. It means policyholder liabilities are treated differently in the accounting line used for the ratio. The negative Z-score still signals earnings or asset-quality stress in the model. FairStock.ai screened the names after solvency signals flashed across Indian financials. The Altman Z-score is a linear model built in 1968 for industrial balance sheets. It isn't a bank capital ratio. It penalizes high total liabilities relative to market capitalization and weak retained earnings. Deposit-funded banks naturally carry high liabilities because customer deposits are liabilities. So a debt-to-equity range of 10.39 to 14.67 is a feature of banking, not a new accounting scandal. But the screen stings because PSU bank stocks have had a strong multi-year run, and any solvency flash can trigger profit-taking. How the Z-Score Hits PSU Bank Stocks The affected names are [Central Bank of India](/stock/CENTRALBK) (NSE: CENTRALBK), [Canara Bank](/stock/CANBK) (NSE: CANBK), [Bank of Baroda](/stock/BANKBARODA) (NSE: BANKBARODA), [Punjab National Bank](/stock/PNB) (NSE: PNB), [Bank of India](/stock/BANKINDIA) (NSE: BANKINDIA), [UCO Bank](/stock/UCOBANK) (NSE: UCOBANK), and [Union Bank of India](/stock/UNIONBANK) (NSE: UNIONBANK). Their debt-to-equity ratios sit between 10.39 and 14.67. In the Z-score formula, ...