PNB Housing Finance to raise Rs 1,700 crore in equity through QIP

PNB Housing Finance's board on Tuesday gave the go-ahead to raise up to Rs 1,700 crore in equity capital through Qualified Institutional Placement (QIP) to support business growth till March 2023, the company informed BSE after board. Its shares closed at Rs 341.7 apiece, 1 per cent up over the previous close on the BSE. The board advised the company that subsequent to closure of QIP, the company offer quality investment holding and associates preferential allotment of equity shares or permissible securities on basis. The housing finance company, however, did not specify timing for the QIP offering. According to CRISIL, the company had initially pegged the size of capital raise at Rs 2,000 crore to reduce leverage. But it scaled down the size of equity capital offering to Rs 1,500-1,600 crore to ensure that PNB continues its hold over 26 per cent stake as promoter.

PNB Housing Finance reports a 32% decline in PBT at Rs 298.2 crore

PNB Housing Finance reported a 32 per cent decline in its profit before tax (PBT) at Rs 298.2 crore for the quarter ended December 2019 (Q3FY20), as its non-performing assets shot up and disbursements fell sharply. Its PBT was Rs 441.6 crore in the same period last fiscal (Q3FY19). The shares of the housing finance company closed 5.01 per cent lower at Rs 542.30 per share on the BSE. Its net profit declined 22 per cent at Rs 237 crore in Q3FY20, from Rs 303 crore in Q3FY19.

Post-merger preparations: PNB seeks time to offload stake in insurance JV

Punjab National Bank (PNB) has written to the Insurance Regulatory and Development Authority of India (Irdai), seeking time for shedding stake in an insurance company, after its amalgamation with Oriental Bank of Commerce (OBC) and United Bank of India.

“We do not want to go for a distress sale, as it will impact the valuation of the insurance company. We have written to the Irdai seeking time window for selling stake in one of the two insurance companies,” a senior PNB executive said.

According to Irdai guidelines, a bank cannot hold more than 10 per cent stake in two insurance companies. At present, PNB holds around 30 per cent stake in PNB MetLife India Insurance as a promoter and OBC holds 23 per cent stake in insurance joint venture — Canara HSBC Oriental Bank of Commerce Life Insurance Company. Following the merger, which will come into effect from April 1, 2020, PNB will take over OBC and United Bank. “The plan is to reduce stake in Canara HSBC Oriental Bank of Commerce Life Insurance to below 10 per cent,” the official said.

Similarly, Union Bank, which will take over Andhra Bank and Corporation Bank will also have to reduce stake in one of the two insurance companies as a result of the amalgamation. Union Bank holds around 46 per cent stake in Star Union Dai-ichi Life Insurance and Andhra Bank is a part of IndiaFirst Life Insurance with 30 per cent stake.

“We may look to exit from IndiaFirst Life Insurance by sale to other partners or public sector banks,” a bank executive belonging to one of the three banks said.

At the time of amalgamation of Bank of Baroda (BoB) with Vijaya Bank and Dena Bank, the Irdai had refused allowing BoB to offer more than three insurance products to its customers. During the BoB merger, which came into effect from April 1, customers holding insurance policies of the other two banks were asked to switch to insurance products offered by BoB, the anchor bank. Customers with life insurance products were given a time of six months to switch over to life insurance offered by BoB, while for non-life and general insurance, customers were required to choose BoB products from April 1.

PNB Q1 results preview: Here's what leading brokerages expect

Punjab National Bank (PNB) is scheduled to report its April-June quarter numbers for the fiscal year 2019-20 (Q1FY20) today amid expectations of a subdued performance. Most analysts expect the bank to report loss in the recently-concluded quarter coupled with a fall in the net interest income (NII). Asset quality, however, is likely to see an improvement, they say.

The bank reported a loss of Rs 940 crore in the same quarter of the previous fiscal (Q1FY19) and that of Rs 4,749.6 crore in the quarter ended March, 2019 (Q4FY19). The NII stood at Rs 4,691.9 crore in Q1FY19 and at Rs 4,200 crore in Q4FY19.

Here is what leading brokerages expect -

Prabhudas Lilladher

The brokerage firm expects the lender to report weaker numbers in terms of NII and net interest margin (NIM) owing to slowdown in the credit growth. The bank is expected to post better gross non-performing asset (GNPA) ratio, down by 233 basis points (bps), from 18.26 per cent in Q1FY19 to 15.93 per cent in Q1FY20.

“PNB is likely to continue to suffer from capital issues and hence loan growth could be muted, while other operating metrics are likely to be weak. Bank has been able to post strong recovery/upgrades in FY19 which are also very crucial in FY20 to improve asset quality ratios and earnings improvement,” it said in a results preview note.

Phillip Capital

Analysts at Phillip Capital, too, expect the bank to report dismal quarterly performance. They peg the NII at Rs 4,316.5 crore, down 8 per cent, YoY. Furthermore, they expect the bank to report a loss of Rs 1,006.9 crore.

The analysts warn of elevated credit costs due to higher levels of GNPAs. They estimate the GNPA ratio at 15.1 per cent and net NPA (NNPA) ratio at 5.9 per cent.

The slippages, however, are estimated to be at Rs 4,000 crore, down 45.7 per cent YoY and 45.2 per cent sequentially.

Sharekhan

It expects PNB to post a 14.7 per cent decline in pre-provision profit at Rs 3,577 crore. However, it sees a net profit of meager Rs 170 crore.

“Recent news on residual stress from old NPAs may be near term overhang, also business momentum is expected to be soft (albeit improving). However, treasury gains should help, asset quality performance and profitability will be keenly monitored,” they wrote in an earnings preview note.

Motilal Oswal Financial Services

The brokerage would watch out for the management’s commentary on the growth outlook, NIMs and CASA (current account-savings account) performance of the bank.

“We expect loan growth to come in at 12 per cent YoY and deposits growth at around 9 per cent YoY. NII growth is also expected to decline by 8 per cent annually,” they wrote in their result preview note adding that stress addition could decline to 4.1 per cent (annualized) but still remain elevated.

The expected credit cost is at 18bps for 1QFY20 along with an estimated loss of Rs 196.3 crore. “Outlook on asset quality, as net stressed loans remain one of the highest in the industry,” they said.

Edelweiss Securities

Analysts at the brokerage firm expect the public sector lender to continue being in the red and report a loss of Rs 905.8 crore.

“Business momentum is expected to be softer (albeit improving). The asset quality performance is likely to show some improvement… That said credit cost will be higher,” they wrote.

PNB detects Rs 3,800 cr fraud by Bhushan Power & Steel Ltd, reports to RBI

Public sector lender Punjab National Bank said Saturday it has detected a fraud of more than Rs 3,800 crore by Bhushan Power & Steel Ltd (BPSL) and has reported it to the Reserve Bank of India (RBI).

PNB said Bhushan Power & Steel Ltd misappropriated bank funds and manipulated its books of accounts to raise funds from consortium lender banks.

"On the basis of forensic audit investigation findings and CBI filing FIR, on suo moto basis, against the company and its directors, alleging diversion of funds from banking system, a fraud of Rs 3,805.15 crore is being reported by bank to RBI," Punjab National Bank (PNB) said in a regulatory filing.

"It has been observed that the company has misappropriated bank funds, manipulated books of accounts to raise funds from consortium lender banks. At present, the case is at NCLT which is in advance stage and the Bank expects good recovery in the account," PNB added.

PNB said the bank has already made provisions amounting to Rs 1,932.47 crore, as per prescribed prudential norms, for the BPSL account.

PNB said its domestic exposure to Bhushan Power & Steel Ltd (BPSL) stood at Rs 3,191.51 crore and overseas exposure of USD 49.71 million (approx Rs 345.74 crore) at Dubai branch and USD 38.51 million (approx. Rs.267.90 crore) at Hong Kong branch.

The state-run bank has reported a new fraud at a time when it is recovering from a major financial embezzlement of around USD 2 billion (around Rs 13,000 crore) by diamond merchant Nirav Modi that was reported in February 2018. Modi allegedly acquired fraudulent letters of undertaking (LoUs) from one PNB's branches for overseas credit from other Indian lenders, and is being probed by CBI and Enforcement Directorate among other agencies.

PNB takes Tarapur Textiles Park to DRT for $13-million loan default

With investigations into Nirav Modi scam in full swing, Punjab National Bank (PNB) has unearthed yet another default from its London branch. The bank has moved the Debt Recovery Tribunal (DRT) against Tarapur Textiles Park for defaulting an amount worth $13 million.

A PNB official said Tarapur Textile account had turned into a non-performing asset and PNBIL (PNB International Ltd) has initiated recovery proceedings against the borrower.

The case had been filed in the DRT by PNBIL in July last year and the matter is pending in court since then, PNB said.

The bank is investigating why the loan was given by the London branch when the project was set up by an Indian company in Maharashtra. The bank has also invoked the personal guarantees of the promoters but it has not yielded any results so far for the bank in its bid to recover the dues.

An email sent to Tarapur Textiles did not elicit any response.

In February last year, PNB made headlines but jeweller Nirav Modi-owned Firestar International and Gitanjali Gems defaulted loans worth Rs 14,300 crore. Nirav Modi is currently in the custody of British authorities even as his plea against extradition to India is heard by an appeal court. In August 13 last year, Allahabad Bank Managing Director (MD) and Chief Executive Officer (CEO) Usha Ananthasubramanian was sacked by the government, a day before retirement, for her alleged involvement in the Rs 14,300 PNB fraud.

Delhi court summons 11 top PNB officials for violating banking regulations

A Delhi court has summoned as accused 11 top officials of the Punjab National Bank (PNB), including former and current executive officials and the current managing director, for alleged violation of banking regulations and criminal conspiracy.

Metropolitan Magistrate Dharmender Singh asked PNB Managing Director (MD) and CEO Sunil Mehta, Executive Director Sanjiv Sharan, former MD Usha Ananthasubramanian, former executive director R S Sangapure and seven others to appear before it on May 24 on the basis of a complaint filed by the Reserve Bank of India.

The court has also summoned as accused serving General Manager I J Arora, Assistant General Managers T R Venkateswaran and I P Singh, Chief Manager S K Srivastava, former general managers Nehal Ahad and Rakesh Kumar and former deputy general manager Sunil Mohan.

In its complaint, the RBI has alleged non-compliance of its 2016 order directing commercial banks, including the PNB, to integrate their core banking system with various critical applications to reduce online fraud.

The central bank alleged that the accused willfully and deliberately gave false information in their compliance report and the PNB's core banking system was not integrated with the applications and there was no online integration of SWIFT with the RBI's Core Banking Solution (CBS).

SWIFT is a messaging system that enables banks and financial institutions to send and receive information about financial transactions through encrypted codes.

The RBI has further alleged that the accused willfully and deliberately made false statements in the compliance report despite being aware of the risks and repercussions of failing to integrate SWIFT with the CBS.

The RBI, in its circular issued to all commercial banks, including the PNB, had advised the banks to strengthen the controls around the operating environment for fund transfers through SWIFT or similar interfaces and banks were advised to minimise the practice of direct creation of payment messages in the SWIFT environment with routing the same through CBS.

The RBI claimed that the case came to light during systems inspection at the PNB's Brady House Branch in Mumbai, where it was found that the information provided by the officials in the last few years were completely false.

"The accused have willfully made false statement in utter disregard to their statutory obligation of the Banking Regulation Act, 1949.

"Accused have deliberately furnished false and misleading statements to RBI and it was done with common intention and in connivance with each other," it alleged.