Altman Z-Score Flags PSU Bank Distress Risk

Every year, a retired schoolteacher in Pune gets her LIC policy statement. It shows a maturity value and a reversionary bonus. It doesn't show the Altman Z-Score. That number is the line at 1.8. Below it, Edward Altman's 1968 bankruptcy model says a company may be heading for distress. FairStock's Altman Z-Score screen flags distress risk in PSU banks and LIC, placing eight Indian names below that line: [LICI](/stock/LICI) (NSE: LICI), [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). The screen sits alongside low P/E ratios and positive return on capital employed for several of these names. That combination is why this is a balance-sheet risk check rather than a standalone sell signal. A low score under 1.8 tells you the balance sheet has high liabilities relative to earnings power. It doesn't tell you that a state-owned bank is about to fail. What the Z-Score Actually Captures Altman's model blends working capital, retained earnings, earnings before interest and taxes, and the book value of equity against total assets. For a manufacturer, that blend has a strong track record. For a bank, it's a blunt instrument. Deposits are liabilities. A large deposit-funded loan book will always push the score down, even when the bank has enough capital to absorb normal losses. That's why the FairStock screen doesn't treat the Z-score as a final verdict. It pairs the flag with other signals. LICI carries policyholder liabilities that run into lakhs of crores. That alone crushes the Z-score. Meanwhile, LIC's solvency margin remains above the regulator's minimum, and its embedded value has grown. [LICI](/stock/LICI) is not the same kind of distress candidate as a debt-he...