Tag: pnb

PNB convenes EGM to elect a 2nd shareholder director to its Board

Banking & Finance

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Punjab National Bank (PNB), the country’s second largest public sector bank, has convened an extraordinary general meeting (EGM) on March 17 to elect ‘one shareholder director’. This will be a virtual meeting of shareholders.

This move is significant as the bank is now looking to rope in its second shareholder director on the strength of a recent Finance Ministry decision empowering Public Sector Banks ( PSB) boards to act on the decisions that remained held up at various board-level committees due to lack of quorum arising from vacancies or recusal by existing directors.

A shareholder director is one who is elected from among shareholders other than central government. A public sector bank has two main categories of shareholders— central government and ‘other shareholders’ (public shareholders). In India, all the public sector banks are listed entities although none of them are registered as companies under the Companies Act. There are separate legislations that govern the Board composition of such PSBs.

 

The elected shareholder director is finally appointed by the Nomination and Remuneration Committee (NRC) of the bank Board concerned. PNB currently does not have the requisite NRC strength and is therefore looking to get another shareholder director through Board approval route after election of such a director by the shareholders of the bank at an EGM.

PNB has moved to get another shareholder director after its recent nearly ₹3,788 crore qualified institutional placement (QIP), which saw the centre’s shareholding in the bank drop from 85.59 per cent to 76.87 per cent. With the Centre’s shareholding coming down, PNB became technically eligible to have two shareholder directors.

Having an additional shareholder director on a Board is useful for Banks like PNB as all shareholder directors are counted as independent directors for the purpose of compliance with SEBI regulations for listed entities.

In Boards of public sector banks, there are executive directors appointed by central government, there is government nominee director (official of central government), there is a RBI nominee director, two employee directors ( representing workmen and officers) and other directors (shareholder directors).

This will be the second shareholder director for PNB besides Asha Bhandarker, who was elected on September 12,2018 for a period of three years.

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Bank Nifty constituents hit new highs after Budget 2021, BFSI News, ET BFSI

Banking & Finance

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by Syed Fasiuddin

Bank Nifty constituents hit new highs shortly after Finance Minister Nirmala Sitharaman announced her budget for 2021. The Bank Nifty, since the announcement of the budget, which included numerous reforms aimed towards the BFSI sector, including the setting up of a bad bank, amendments towards the Insurance Act of 1938, the recapitalisation of public sector lenders, and the proposed divestment of two public lenders and one general insurer, amongst others, sparked cheer in the market – recording a 3074 point jump.

Public Bank stocks jump
Government owned lenders and constituents of the Bank Nifty Index – including the State Bank of India, Punjab National Bank (PNB), Bank of Baroda, recorded sharp single and double digit rises in values since February 1, when the budget was first announced. SBI within the day recorded a spectacular jump of 7.21%, closing at Rs 333.10 – rising by Rs 22.40. PNB and BoB recorded jumps of 1.26% and 1.01%, respectively, on February 2. PNB at the end of day traded at Rs 36.20, whilst BoB traded at Rs 74.65 – rising by 0.45 and 0.75 points, respectively.

Private lender stocks cheer
Private lenders RBL Bank, Federal Bank, HDFC Bank and Bandhan Bank recorded the highest jumps since the budget was first announced, rising by 11.52%, 10.08%, 9.9% and 9.84% respectively. RBL Bank recorded a jump of 25 points, closing at RS 242.00 at the end of market hours. HDFC Bank alone rose by 140.9 points, trading at Rs 1560, since the budget was announced, whereas Bandhan Bank rose by 30.40 points, to close at Rs 339.35, on February 2. Kerala based Federal Bank also recorded a 7.35 point jump to trade at Rs 80.25 by the close of the BSE.


Other constituents of the Bank Nifty, including ICICI Bank, Kotak Mahindra Bank and Axis Bank, recorded similar gains, jumping by 9.61%, 8.47% and 8.13%, respectively. ICICI Bank rose by 54.20 points to close at Rs 618.45, whereas Kotak Mahindra Bank and Axis Bank recorded an increase of 145.50 points and 53.65 points, respectively, to close at Rs 1863.50 and Rs 713.70.

Bankers remain optimistic
Both public and private bankers expressed optimism at the budget unveiled by Nirmala Sitharaman, on February 1. Dinesh Kumar Khara, Chairman of the State Bank of India (SBI), said “The Union Budget has unveiled a set of well-crafted and robust policies that encompasses the vision of an Atmanirbhar Bharat. The Budget has rightly envisaged a substantial jump in capital expenditure that has a strong multiplier impact on the economy. The decision to open up the insurance sector, setting up a DFI and an ARC, privatizing a couple of public sector banks are all positive steps for the financial sector.”

The Chairman of India’s largest lender further said “One of the cornerstones of this budget is fiscal numbers that are transparent and has the potential to surprise us on the upside. In principle, the budget has rationalized the off-balance-sheet borrowings and headline fiscal deficit numbers, which will overtly please markets and even rating agencies. The fact that the expenditure announcements in the budget have been matched with the status quo on taxes will please everyone and bolster market sentiments.”

Kotak Mahindra Bank founder Uday Kotak, expressing his views on the budget, tweeted “A Budget for growth with next-gen reforms. Focus on healthcare, infra, financial sector. A stable tax regime, higher borrowings for capex. Specific reforms: disinvestment & monetization, opening up of insurance, cleanup plan for stressed assets. Sign of a self confident India.”

Chandra Shekhar Ghosh, MD & CEO, Bandhan Bank, noted “The government has prioritised spending on growth at this stage, in the hope that such growth would help manage the fiscal deficit subsequently. A substantial increase announced in the expenditure on healthcare and infrastructure will help boost economic growth, including the MSME sector and generate employment. Overall, it was a growth-centric Budget aimed at securing India’s long-term economic interest.



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Nifty ends below 14,450 dragged by financials, BFSI News, ET BFSI

Personal Finance

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Sensex managed to hold on to the 49,000 mark despite falling 550 points. Nifty fell 1.11% at 14,433. All sectoral indices were in the negative zone, with banks, IT and pharma worst hit. At close, Nifty bank index traded lower at Rs 32,246 down by -0.84%, while BSE Bankex ended at 36,540 down by -0.99%.

Amongst the top losers were- PNB at Rs 35 (-2.85), followed by ICICI bank at Rs 543 (-1.86), Kotak Mahindra at Rs 1863 (-1.52), Bank of Baroda at Rs (-1.38%), SBI at Rs 303 (-1.11%), Induslnd Bank at Rs 965 (-0.38%), Axis bank at Rs 674 (-0.17%). IDFC first Bank traded in the green adding 4.76% at Rs 48.

Nifty Financial Services ended at 15,453 down by 1%. Amongst the top losers were HDFC at Rs 2,632 down by -1.91% followed by Indiabulls hsg at Rs 230 (-1.03%), Cholamandalam at Rs 424 (-0.48%). Bajaj Finance and Power Finance traded green adding 0.13% and 0.41% respectively.

Other key takeaways

Economic recovery likely to boost gold demand in India this year: WGC
Gold demand appears to be positive in India as the consumer sentiment is likely to recover in 2021, from its dismal performance due to the coronavirus pandemic-related disruptions and volatile price movement, according to a report by the World Gold Council (WGC).

Initial data about the Dhanteras festival in November suggest that while jewellery demand was still below average, it had substantially recovered from the lows seen in the second quarter (April-June 2020) of last year, according to the report.

Budget session to begin from Jan 29, Budget on Feb 1:
The Union Budget 2021-22 would be presented on February 1, confirmed the Lok Sabha Secretariat. The Parliament session would be starting from January 29, and would be held in two phases.

“The fifth session of 17th Lok Sabha will commence on Friday, the 29th January, 2021. Subject to exigencies of government business, the session is likely to conclude on Thursday, the 8th April, 2021,” said an official press release by the Lok Sabha Secretariat.

Indian bond yields rise:
India’s benchmark bond yield rose on Friday to a three-week high as a lack of an open market operation announcement disappointed investors ahead of a debt sale and variable rate reverse repo auction later in the day.

The Reserve Bank of India last week said it would conduct a variable rate reverse repo auction for 2 trillion rupees ($27 billion) on Jan. 15 on review of the evolving liquidity and financial conditions.

Rupee ends at days high
The movement in USDINR spot is in tandem with other Asian peers and going ahead the optimism over US stimulus package will keep it lower. Indian rupee ended marginally lower at 73.12, amid selling saw in the domestic equity market. It opened lower at 73.08 per dollar versus Thursday’s close of 73.04 and traded in the range of 72.99-73.17.

Wall Street ends lower:
Wall Street closed lower on Thursday after making a u-turn toward the end of the session as reports emerged about U.S. President-elect Joe Biden’s pandemic aid proposal following earlier data that showed a weakening labor market.

The Dow Jones Industrial Average finished down 68.95 points, or 0.22%, at 30,991.52 while the Nasdaq Composite dropped 16.31 points, or 0.12%, to 13,112.64. The S&P 500 lost 14.3 points, or 0.38%, to close at 3,795.54.



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SBI, PNB, other Indian banks see sharp fall in NPAs; these reasons to thank for improved asset quality

Banking & Finance

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SBI alone had recoveries to the tune of Rs 4,038 crores and has written off loans worth Rs 5,617 crores.

India’s largest PSU banks — State bank of India (SBI) and Punjab national bank (PNB) — saw a significant fall in non-performing assets in the fiscal’s second quarter. SBI, which accounts for the highest share of PSU Banks’ GNPAs at 20 per cent, reported the highest asset quality improvement in the second quarter. Its GNPA ratio fell to 5.3 per cent in September 2020, compared to 7.2 per cent in the same month last year. Another large PSU bank, PNB that accounts for 16 per cent share in overall PSU banks’ GNPAs, saw a fall in NPAs at 13.4 per cent in September 2020, compared to 16.8 per cent in the last year. 

The improvement in asset quality has majorly been due to recoveries and higher write-offs by the multiple banks. SBI alone had recoveries to the tune of Rs 4,038 crores and has written off loans worth Rs 5,617 crores, according to Care Ratings. Among other PSU banks, NPAs of Bank of India fell from 16.31 per cent to 13.79 per cent on year in Q2; Bank of Maharashtra (16.86 per cent to 8.81 per cent); Indian Overseas Bank (20 per cent to 13.04 per cent); and NPAs fof UCO Bank fell from 21.87 per cent to 11.62 per cent on-year in Q2.

The net NPAs of all banks also shrank significantly to Rs 2.1 lakh crores in Q2 FY21 from Rs 4.5 lakh crores in Q2 FY19, reflecting an increase in provision coverage ratio (PCR). The aggregate provision coverage ratio of all banks rose to 80 per cent at the end of Q2, from 68.9 per cent in the previous year. The GNPA ratio of scheduled commercial banks further improved to 7.7 per cent in the quarter ended September 2020, against 9.3 per cent in the year-ago period, and 8.2 per cent in the current fiscal’s first quarter, which was largely driven by PSU banks. 

The aggregate interest income recorded a marginal increase of 0.8 per cent during Q2 due to subdued credit offtake, coupled with falling interest rates. Additionally, the falling deposit interest rate in the quarter also led to a decline in interest expense of banks by 8 per cent, compared with 9.4 per cent growth in the year-ago period.

It is to be noted that the Supreme Court has ordered all banks to not classify Covid-19 related defaults as NPAs until further notice, or else the NPAs would have been higher in the second quarter. As per disclosures by banks studied by the rating agency, the Gross NPAs would have been around 0.5 – 0.6 per cent higher if these accounts been classified as NPAs. Meanwhile, IDBI Bank and Lakshmi Vilas Bank had the highest NPA ratios of around 25 per cent in the second quarter.  

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Moratorium, loan recoveries help Indian banks improve GNPA ratio, but will it sustain?

Personal Finance

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While the overall lending rates have declined when we look at the headline rates, the transmission is probably slower when we look at various products or risk segments.

India’s banking sector saw its gross non-performing assets (GNPA) come down in the second quarter of this fiscal year. The GNPA ratio of SCBs improved to 7.7% in the quarter ended September against 9.3% in the year-ago period, CARE Ratings said in a report. Although the asset quality of the banks seems to be better, the improvement has come owing to the moratorium offered by the Reserve Bank of India (RBI), recoveries and higher write-offs made by multiple banks. “As per disclosures by banks, the Gross NPAs would have been around 0.5% to 0.6% higher had these (moratorium) accounts been classified as NPAs,” the report said.

Asset quality improves

Among state-owned banks, India’s largest lender State Bank of India (SBI) reported the highest asset quality improvement, with a decline in GNPA ratio to 5.3% in the second quarter of this fiscal year against 7.2% a year ago. SBI accounts for nearly 20% of public sector bank GNPAs. Punjab National Bank (PNB) reported GNPAs at 13.4% against 16.8% a year ago. “Net NPAs also shrank to Rs 2.1 lakh crores in Q2FY21 from Rs 4.5 lakh crores in Q2FY19 reflecting an increase in provision coverage ratio (PCR),” CARE Ratings said. 

Recoveries were better in the fiscal second quarter, helping in improving the asset quality of banks. SBI’s recoveries stood at Rs 4,038 crore, ICICI Bank was at Rs 1,945 crore, followed by Bank of Baroda with Rs 1,642 crore worth of recoveries. “On an overall basis PSBs accounting for 75% share of GNPAs of SCBs have experienced a drop in the GNPA ratio to 9.3% in the quarter ended September against 11.6% in the year-ago period,” the report highlighted. 

Skeletons to be unearthed ahead?

CARE Ratings said that now that the moratorium offered by the banks has been lifted, the after-effect and the impact on the banks’ balance sheets may be witnessed in the latter part of the year and subsequent period. Banks have been ordered to not declare covid-19 related defaults as NPAs until further notice, hence keeping the GNPA ratio lower. However, following this many banks have kept aside extra provisioning for NPAs that may arise in future, making higher provisions in September. 

The report said that in the coming quarters provisions of SCBs are likely to remain elevated on account of the recognition of stressed assets owing to Covid-19 and its disruptions affecting the businesses which could impact the financial performance.

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