Tag: punjab national bank

Ahead of new ARC formation, Punjab National Bank to sell Arcil stake

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A detailed framework for the ARC is in the works, financial services secretary Debasish Panda said earlier this month, adding that the government will not be putting in any money.

As the process to set up a new national asset reconstruction company (ARC) gathers steam, Punjab National Bank (PNB) has begun the process to exit Asset Reconstruction Company (India), also known as Arcil. The bank’s investment arm on Monday sought expressions of interest from potential buyers in a public notice.

“PNB has initiated a sale process to offer its holding of 3,25,06,486 equity shares i.e. 10.01% of the paid-up equity share capital of ARCIL (“proposed transaction”). PNB Investment Services Limited is the advisor to PNB (referred to as “PNBISL”/ “advisor”) for the proposed transaction,” PNBISL said in the notice.

Arcil’s other sponsors are: Avenue India Resurgence, State Bank of India, IDBI Bank and ICICI Bank. Arcil is an associate member of the Indian Bankers’ Association. In November 2018, US-based Avenue Capital bought a 27% stake in the company for an unspecified amount as investors IDFC Bank, Ashmore Capital, FirstRand Bank, Barclays, Singapore’s GIC and Karur Vysya Bank exited it.

There has been little clarity so far on how the new ARC, proposed in the Budget, will be funded. While some government officials have said that it will be up to banks to put in seed money, it is not yet clear which banks will actually invest. A detailed framework for the ARC is in the works, financial services secretary Debasish Panda said earlier this month, adding that the government will not be putting in any money.

FE had reported in January that bankers plan to seek two exemptions for the new ARC. First, relaxation of the September 1, 2016 circular which effectively requires banks to provide for an asset assigned to ARCs as if it were still on the bank’s books. The other would be to exempt the new ARC from making future provisions for assets it buys.

In a recent report, SBI’s economic research wing said public sector banks (PSBs) now have a provision coverage ratio of around 86% (up from 62% in FY18). “This implies that the PSBs would have provided for most of the bad assets and a wholesale transfer of the bad assets to the bad bank is just a technical issue and the process of recovery and resolution could be carried out much better,” the report said.

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PNB not to take part in PNB Housing Finance’s planned fund-raise

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Punjab National Bank (PNB) will not be participating in the capital-raise plans of its associate company PNB Housing Finance Limited (PNBHFL). However, despite the promoter PNB not participating, PNBHFL intends to continue to pursue with its proposed plan to raise ₹1,000 crore capital.

This decision by PNB is being seen in banking circles as a consequence of RBI not giving the go ahead to the bank’s application to infuse equity in PNBHFL.

“Punjab National Bank has communicated that it will not be participating in the capital-raise plans of the company. However, the company will continue to pursue with the proposed capital-raising plan through permitted modes,” PNBHFL said in a regulatory filing with the bourses.

PNBHFL has now said that it would look to raise capital of up to ₹1,000 crore through permitted modes including qualified institutional placement (QIP).

It maybe recalled that the Board of PNBHFL had, on August 19 last year, given the nod to the company to explore the possibility of raising capital (about ₹1,800 crore) through rights or preferential issue. Before that, PNB had approached the RBI for permission to infuse equity into the company.

In order to maintain optionality and timely injection of capital, the PNBHFL Board had last month (January 2021) approved the addition of the QIP mode in the capital-raise plan, in addition to rights and preferential issue. This was subject to PNB’s holding remaining above 27 per cent, with 26 per cent being minimum. PNB held 32.7 per cent stake in PNBHFL as on December 31, 2020.

As of end December 2020, PNBHFL’s capital to risk asset ratio (CRAR) based on IndAS stood at 20.06 per cent, of which Tier I capital was 17.42 per cent and Tier II capital was 2.64 per cent.

Earlier this month, PNB Managing Director and CEO Ch SS Mallikarjuna Rao had expressed confidence over getting RBI nod for infusing capital in its housing finance arm.

PNBHFL Managing Director & CEO Hardayal Prasad had, in an analyst call in January 2021, too expressed “hope” and “confidence” that PNB will get approval from the RBI for capital infusion.

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PNB not to take part in housing finance arm’s planned fund raise, BFSI News, ET BFSI

Banking & Finance

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Mumbai, Punjab National Bank will not take part in the capital raising plans of PNB Housing Finance.

Last August, the Board of PNB Housing Finance approved raising Rs 1,800 crore of equity capital through preferential issue or rights issue.

Referring to the decision, PNB Housing, in a regulatory filing, said that it will continue to pursue with the proposed capital raising plan.

“Punjab National Bank has communicated that it shall not be participating in the capital raise plans of the company. However, the company will continue to pursue with the proposed capital raising plan through permitted modes,” the filing said.

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NPA risks easing for largest PSU banks but shortage of funds could hit credit growth

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State Bank of India, Bank of Baroda, Punjab National Bank, Canara Bank, and Union Bank of India, have all reported an improvement in their asset quality in the first nine months of the current fiscal year.

Risk of a sharp deterioration in the asset quality of five of the largest PSU banks now seems to be abating with the economic recovery picking up pace, said Moody’s Investors Service in a recent note. However, despite this, the rating agency cautioned that such public sector lenders are likely to remain starved of sufficient capital to absorb unexpected shocks and support credit growth. Banks were expected to see a sharp rise in NPAs last year when the pandemic slowed the Indian economy down but despite the economic slump, the asset quality of banks has seen mild improvement.

Risks reducing for banks

State Bank of India, Bank of Baroda, Punjab National Bank, Canara Bank, and Union Bank of India, have all reported an improvement in their asset quality in the first nine months of the current fiscal year. “The gross NPL ratios of the five banks declined by an average of around 100 basis point as of the end of 2020 from a year earlier,” Moody’s said. The estimates even account for loans that have not yet been declared NPAs owing to the Supreme Court order. Lenders are also drawing comfort from the provisions made by them against the expected jump in NPAs.

During the pandemic, various measures were undertaken to support borrowers. This, according to Moody’s has largely helped limited impact of the pandemic on the banks’ asset quality. These measures included loan repayment moratorium, loan restructuring, monetary easing, liquidity infusion, Capital infusion into public sector banks, lowering LCR, among others. “As of the end of December 2020, the five banks restructured 0.7%-2.6% of gross loans, less than our expectations, as the impact of the pandemic on borrowers was not as severe as we had anticipated,” the report said.

Dearth of capital to result in uneven recovery

Despite the green shoots, capital shortage remains a risk. “The banks will continue to face shortages of capital to both absorb any unexpected stress and support credit growth, with high credit costs continuing to suppress profitability,” they added. This shortage in the capital could result in an uneven recovery for the Indian economy with various vulnerable industries facing a setback. The banks’ asset quality can also deteriorate more than anticipated, with exposures to the MSMEs, in particular, posing risks, Moody’s said.

The government planned to infuse Rs 20,000 crore into public sector banks this fiscal year and another Rs 20,000 in the next financial year. While the capital infusions will help the banks meet Basel capital requirements, it will not boost credit growth, according to the report. This would result in some banks turning to the market. Canara Bank and PNB have already raised some capital from equity markets.

On the other hand, in an earlier note, Moody’s said that private sector banks have raised sufficient capital buffers to tide through any hiccups going forward. Asset quality of private lenders remains supported by the same measures that have aided their public sector peers.

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RBI seeks details of Punjab National Bank’s capital raising plans, BFSI News, ET BFSI

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The Reserve Bank of India wanted to know about Punjab National Bank’s (PNB) future capital projection as the regulator examines the lender’s proposal to infuse Rs 600 crore in PNB Housing Finance.

PNB, the promoter of the mortgage lender, had sought the regulator’s approval about seven months’ back. RBI’s decision is still awaited, delaying PNB Housing Finance’s capital raising plan.

PNB’s chief executive SS Mallikarjuna Rao is expecting a positive note from RBI soon. “It’s not that the issue is stalled or there is no communication. The regulator was seeking details on the bank’s capital position and capital raising plans,” he said.

PNB, with a 32.65% ownership, proposed to infuse equity capital in PNB Housing through rights or preferential issue of shares. The bank augmented its capital by Rs 3,788 crore in December in qualified institutional placement even as it was looking to raise Rs 7,000 crore.

On August 19, 2020, the PNB Housing Finance board had approved Rs 1,800 crore capital raising through rights and preferential issue of shares. “Before that the PNB had approached the Reserve Bank of India for permission to infuse equity into the company. Since they had actually asked that the equity infusion can take place either through rights issue or preferential, we were awaiting permission from the Reserve Bank of India,” PNB Housing Finance chief executive Hardayal Prasad told analysts after the company’s third quarter results.

With the delay in getting the regulator’s nod, PNB Housing board last month approved share sales to other institutional investors as the lender needs capital for its medium-term growth plans.

“We are hopeful that PNB would be able to get its approval. Once that approval comes, we still can issue the rights or the preferential,” Prasad said.

Meanwhile, PNB is planning to go to investors again to raise Rs 3,200 crore from share sales. It would also look to issue additional tier-1 bonds (AT-1 bonds) worth Rs 2500 crore before March 31.

The lender has garnered Rs 4,000 crore in tier-II bonds and Rs 495 crore in AT-1 bonds in the last few months.



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HDFC Bank beats SBI in Covid scheme loans, BFSI News, ET BFSI

Banking & Finance

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HDFC Bank has outdone State Bank of India (SBI) in disbursements under the Emergency Credit Line Guarantee Scheme (ECLGS) introduced by the government as a part of the Covid relief package. The scheme involved a government guarantee for additional loans, up to Rs 3 lakh crore, extended to businesses facing stress due to the Covid pandemic.

Of the total loans of Rs 1.4 lakh crore extended by banks up to January 25, 2021, HDFC Bank has disbursed Rs 23,504. This is nearly 17% of the loans sanctioned. SBI, with disbursals of Rs 18,700, has a market share of 13.3%. According to banking analysts, this demonstrates HDFC Bank’s capabilities in lending to small businesses.

The ECLGS came in two phases. The first ECLGS-1 was for only small businesses and, in the second ECLGS-2 round, it was extended to large industries that were part of the 26 stressed sectors. HDFC Bank’s performance has enabled private sector banks outdo public sector banks (PSBs) in funding for the micro, small and medium enterprises (MSME) sector.

In response to a query in Lok Sabha, minister of state for finance Anurag Thakur said that the total amount of loans sanctioned and disbursed by the banking sector was just a shade under Rs 2 lakh crore and Rs 1.4 lakh crore, respectively. Of this, the sanctions and disbursements by public sector banks were Rs 83,162 crore and Rs 61,226 crore. In the case of private banks, the sanction and disbursement numbers were Rs 1.15 lakh crore and Rs 80,227 crore.

In the public sector, after State Bank of India (SBI) the second-highest disbursements are by Punjab National Bank (PNB). In the private sector, ICICI Bank with Rs 12,982 crore is the second-largest lender, followed by Axis Bank with Rs 8,099 crore.

PSBs have traditionally been the dominant lenders to the MSME sector. But the typical trend for last few years is that private banks and non-banking finance companies (NBFCs) have strongly competed with PSBs in gaining a larger share of the MSME sector.

However, that trend changed after the nationwide lockdown. As of June 20, NBFCs had a share of 9.7% of MSME lending — down from 13% in March, followed by private banks with 38.7% share in loans and PSBs with 51.6% marketshare, according TransUnion Cibil. The state-run lenders still account for over 60% of the banking business in the country.

SBI, in an investor call on February 4, had said that the bank had sanctioned Rs 26,000 crore (cumulative) under the ECLGS. Of this, Rs 23,000 crore has been disbursed cumulatively. The bank also said that only Rs 488 crore was disbursed under ECLGS-2 and the rest was in ECLGS-1.

In the call, the bank’s chairman Dinesh Khara said that although the window for restructuring for medium and small business enterprises is available up to March 31, the additions would not be substantial. He said that the ECLGS disbursements were lower in the latest quarter because the bank had picked up SME growth in segments other than the ECLGS scheme.



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PNB expects Rs 3,800 cr recovery from Bhushan Power resolution; sees good amount from DHFL too, BFSI News, ET BFSI

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State-owned Punjab National Bank (PNB) is expecting to recover a substantial Rs 3,800 crore from Bhushan Power and Steel under debt resolution in NCLT, which will help it achieve the target of Rs 8,000 crore cash recoveries during this fiscal, its managing director and CEO S S Mallikarjuna Rao said.

Besides, the city-based lender also hopes to make good recovery of its exposure in crisis-hit DHFL, which is undergoing a resolution process currently.

Sticking to the bank’s previous guidance on restricting the gross NPAs below 14 per cent and net NPAs lower than 5 per cent by the end of the current fiscal, Rao said there has been an improvement in collection efficiency as well in January after a dampened December.

Across the banking industry, the collections were much better in October and November, before dampening again in December because of lack of clarity on NPA recognition from the Supreme Court, he added.

In response to a public interest litigation during Covid times, the Supreme Court had passed an interim order in September, directing banks not to declare accounts as NPA, which otherwise would have turned dud, during March-August till further orders.

“So there was an impulse on identification on NPA. However, the collections have again improved in the month of January across the banking industry, including our bank. Considering, these factors, we are very confident that there won’t be any further increase (of bad loans). About pro-forma NPA, we have already marked them, we have identified and have done the complete provisioning, so there won’t be any impact in Q4 (FY21),” Rao said in a conference post bank’s December quarter results.

“On the contrary, I am expecting reduction of the proforma NPA what we have declared as on December 31, 2020.”

The bank has posted a net profit of Rs 506 crore on a standalone basis in the quarter ended December 2020 of this fiscal. It had posted a net loss of Rs 492.28 crore in the year-ago period.

The lender also cut down on its gross non-performing assets (NPAs) to 12.99 per cent by the end of the December quarter from 16.30 per cent in the year-ago period. While, net NPAs reduced to 4.03 per cent from 7.18 per cent.

Rao said the recovery from smaller accounts have been better, if not very good, as there was a dampening spirit in December.

“Recoveries are better in January, it will be definitely on the expected lines up to March. Last time, I had given guidance of recovery of about Rs 8,000 crore through reduction (by way of resolution) in NCLT cases. So we will await as there are big accounts… Bhushan Power is one account where we are anticipating cash recovery of Rs 3,800 crore. And DHFL is also there where bidding (for resolution of NPA) has been completed very recently. There also we expect a good amount of recovery,” Rao said.

So these two things (Bhushan Power & Steel Ltd and DHFL) together will be able to achieve the expected target what we were anticipating in terms of NCLT (National Company Law Tribunal), he added.

In June, the chief of the country’s second largest public sector lender had said that PNB expects to make recoveries worth Rs 8,000 crore in 2020-21.

On the NPA situation, Rao said as the bank has already identified those accounts which otherwise could fall into NPA category and its bad asset numbers would have been different and has made provision accordingly, there won’t be any change in its earlier stance of restricting gross and bad loan ratios below 14 per cent and 5 per cent, respectively.

“So, our guidance is what we have given last time also. We would like to retain the net NPA below 5 per cent by March and we would like to retain the gross NPA 14 per cent… January appears to be much better in terms of collections. So I am very confident that we will be able to control the NPA,” Rao said.



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PNB on track to achieving proit of ₹ 2,000 crore this fiscal despite Covid-19 challenges

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Punjab National Bank, Inida’s second largest public sector bank, is confident of recording profits in the fourth quarter as well as achieving the overall indicated profit of ₹2,000 crore for the current fiscal despite pandemic induced challenges, Ch. SS Mallikarjuna Rao, Managing Director & CEO, has said.

The public sector bank is also confident of keeping the gross NPA level as a percentage of advances below 14 per cent and net NPA level below 5 per cent by end-March this fiscal, Rao told a virtual press conference on Saturday, after the announcement of the Q3 financial performance.

It maybe recalled that PNB senior management had at end of September this fiscal guided for gross NPA of less than 14 per cent and net NPA of 5 per cent by end March 2021.

“We still retain that (guidance). While challenge has been there for Q3 and SC judgement is holding back on identification of NPA, January 2021 appears to be better in terms of collections. We are very confident we will be able to control. Our effort will be to maintain at the same level as we have declared today…but the stress in the system for which we have done provisioning, we would like to see that stress removed in Q4,” he said.

Although the Supreme Court is yet to pronounce final judegment on the NPA recognition matter, PNB has made an assessment, and based on that made adequate provisioning in the financial statements for the quarter ended December 31, 2020, he said.

As of end December 2020, PNB had gross NPA of 12.99 per cent and net NPA of 4.03 per cent. This was lower than the gross NPA of 13.43 per cent and net NPA of 4.75 per cent in September 2020.

On Friday, PNB reported a net profit of ₹506 crore for the third quarter ended December 31, 2020. For the first half this fiscal, PNB had reported a net profit of ₹929 crore.

“We are looking at market conditions to optimise the profitability in terms of credit and treasury,” he said, exuding confidence of good fourth quarter performance. “If you look at the performance of PNB in last three years, it is slowly and steadily coming to profitability in terms of business and strengthening of asset quality,” he said.

Bad bank

Rao said that the concept of a bad bank was welcome initiative. He that the proposed initiative is going to be a facilitator to bring all the approvals for the bidder at one go and that it is going to be a single window process.

In his view, the bad bank at the initial stage will only see “transfer” of assets from the lender and will not be a “purchase” transaction. “Because this is only a transfer of assets, I don’t expect any bottlenecks. Within one year bad bank will get settled and attain maturity,” he said.

Although the Finance Ministry has categorically said that government will not infuse any capital in the bad bank, Rao felt that capital requirement will only be moderate and the banks themselves will be able to fork this out. “Capital requirement will arise only when bad bank purchases from the banks. It will not be a purchase as I understand it will be a transfer which will not require capital at the higher level. It will require moderate capital,” he said.

Engaging with investors

Rao indicated that PNB would begin engaging with investors to gauge the appetite for further qualified institutional placement (QIP) from Monday. It maybe recalled that PNB had in December 2020 raised ₹3,788 crore via QIP, which fell short of the announced targeted mop up of ₹7,000 crore. “We will do the remaining portion of QIP at an appropriate time. It could happen even before this fiscal end,” he said.

Rao also said that PNB would raise Additional Tier 1 (AT-1) capital of ₹2,500 crore before end March.

Till date, PNB has raised ₹8,283 crore out of the ₹14,000 crore capital that it last year set out to raise from the market. Rao also said that PNB is not looking to seek any capital support from the government and would look to “stand on its own legs” and mobilise capital from the market.

As regards plans for life insurance companies which it has invested in and whether the bank would review shareholding now that FDI limit has been raised to 74 per cent in budget, Rao said that no such immediate plans are there on this front.

PNB chief pointed out that both PNB MetLife (PNB holds 30 per cent) and CHOICE (PNB holds 23 per cent) are unlisted companies, and would first be required to be listed to discover the right enterprise valuation.

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PNB: IT integration of erstwhile UBI completed

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Punjab National Bank (PNB), country’s second largest public sector bank, has now completed the IT integration of all branches of erstwhile United Bank of India (UBI).

This is in continuation to the IT integration of all branches of erstwhile Oriental Bank of Commerce, undertaken in November 2020.

With this PNB has concluded the integration and migration of databases of both banks, which brings all the customers on the common platform and enable them to transact seamlessly across bank’s network as well as use PNB’s digital banking platforms like Internet Banking and Mobile Banking.

The entire migration has been completed without effecting any change in customers account numbers, debit cards or Net Banking credentials, a PNB release said.

‘Minimal disruption’

PNB has completed this migration activity with minimal disruption and now all customers will be able to enjoy an array of services on its wider network of branches, ATMs and robust digital channels, release added.It may be recalled that the Centre had with effect from April 1 this year merged Oriental Bank of Commerce and United Bank of India with PNB in a three-way amalgamation.

CH.S.S. Mallikarjuna Rao, Managing Director & CEO, PNB said in a statement: “This is an important milestone for all of us displaying our unflinching commitment to the customers of PNB 2.0. This migration brings all our customers on a singular platform and provides opportunity for seamless engagement. We shall continue to provide state-of-the-art services to all our customers.”

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