Ahead of its plan to raise funds via
qualified institutional placement,
Punjab National Bank (PNB) has revealed a pile of stressed loans.
As of December, the lender had 13.2% of loans with repayment overdue for more than one month.
It had a gross bad loan ratio of over 14% for the December quarter with most stressed segments being corporate loans and small businesses. MSME dominated loans those where repayments are overdue for more than thirty days or SMA loans.
PNB’s ratio of loans that were in default for anywhere between one and 90 days stood at 20% of the overall book at the end of 2020, according to the offer document issued by the bank. It witnessed a sharp increase in its stressed loans during the moratorium period last year.
SMA accounts
The special mention account (SMA)-2 loans, where repayments are overdue for 61-90 days, rose to 8.8% as on December 31, 2020, from 2.74% as on September 30, 2020.
The SMA loans as of December 31, 2020, also include loans that were not being classified as non-performing assets (NPAs) in line with the Supreme Court’s interim stay on recognition of fresh bad loans after August 31, 2020.
With the stay vacated on March 23, these loans are likely to slip into NPAs as of the March quarter of FY21.
About 2.89% of MSME advances were classified as SMA 2 while 2.72% loans in the corporate sector were unpaid between 61 and 90 days.
In Bank of Baroda‘s offer document too, the bank’s SMA ratio surged to 21.57% as on December 31, 2020, from 8% on March 31, 2020.
These are likely to slip into the NPA bucket in the March quarter of FY21 as the stay was vacated on March 23.
while both banks had around 20% of their loans under SMA, PNB carried a much higher ratio of SMA 1 and 2 loans — 13% — compared to 9% for BoB. Segment-wise, SMA2 for PNB is nearly double that of BOB in the retail and corporate sector.
The QIP
PNB board has approved raising equity capital from qualified institutional investors to enhance its capital base. For the Qualified Institutional Placement (QIP) purposes, the bank has fixed the floor price at Rs 35.51 per equity share. The ”Relevant Date” for the purpose of the QIP is May 10, 2021 and accordingly the floor price in respect of the aforesaid QIP, based on the pricing formula as prescribed under SEBI ICDR Regulations is Rs 35.51 per equity share, PNB said in a regulatory filing.
The merger
Last year, Oriental Bank of Commerce (OBC) and United Bank of India (UBI) were merged into Punjab National Bank (PNB), making PNB India’s second-biggest public sector bank after State Bank of India (SBI).
In a first three-way amalgamation, Vijaya Bank and Dena Bank were merged with Bank of Baroda from April 1, 2019.