Altman Z-Score flags distress across PSU banks, LICI

A FairStock.ai fundamental screen released this week puts Life Insurance Corporation of India and seven public sector banks below the 1.8 Altman Z-Score threshold. The Altman Z-Score flags distress zone across PSU banks and LICI, and the raw numbers look alarming at first glance. FairStock data shows Central Bank of India (NSE: CENTRALBK) with the weakest reading in the group at 1.08. UCO Bank (NSE: UCOBANK) follows at 1.21. [LICI](/stock/LICI) (NSE: LICI) sits at 1.67. [Bank of Baroda](/stock/BANKBARODA) (NSE: BANKBARODA) is the closest to the cutoff at 1.73. The full list includes [Punjab National Bank](/stock/PNB), [Canara Bank](/stock/CANBK), [Bank of India](/stock/BANKINDIA), and [Union Bank of India](/stock/UNIONBANK). At face value, that is a broad distress signal across state-owned lenders. But a blanket read is wrong. Edward Altman built the 1968 model for industrial companies. Banks and insurers do not fit the template. Altman Z-Score distress zone: why the bank screen misfires The five-factor Z-score uses working capital, retained earnings, EBIT, sales, and market value of equity. Banks don't have conventional working capital or sales. Their raw material is deposits and borrowings, and their product is credit risk. Altman himself excluded financial firms from the original sample for exactly this reason. Public sector banks carry another layer of distortion. Deposit insurance and state ownership reduce the probability of a classic bankruptcy. That does not mean credit losses cannot hit equity. It does mean a Z-score of 1.1 at Central Bank of India is not the same as a 1.1 at a high-debt industrial. The FairStock screen works better as a tail-risk flag than a death sentence. It forces investors to ask whether earnings cover the cost of risk. PSU bank valuations and FairStock Scores: cheap but not clean Valuations across the group remain low relative to private lenders. [Canara Bank](/stock/CANBK) trades near 6.2 times trailing earnings and 1.0 times...