IF CONSOLIDATION COMES, PNB WILL GO FOR GEOGRAPHICAL SYNERGIES: MEHTA
How do you see your treasury income in the fourth quarter (January-March), after the government announced a plan to borrow another ~50,000 crore?
In the fourth quarter, there will be some pressure on treasury income. Perhaps not as much as in the past because treasury income is directly related to the interest rate scenario. I feel interest rates have already bottomed out.
How much exposure do you have in the Reserve Bank of India’s (RBI’s) second list of NPAs (non-performing assets)?
That list has 28 cases, of which our bank is participating in 20. For these, the exposure is ~6,500 crore and incremental provisioning requirement is ~800 crore. Of this, I had already provided ~75 crore till September; that leaves ~725 crore. The RBI gave a mandate that if you are able to resolve these cases, then it’s okay. Else, you will have to go to NCLT (National Company Law Tribunal). Even in the worst case scenario when nothing is resolved and let’s say all will go to NCLT, my additional provisioning is ~725 crore, which I can very well take care.
Are you looking to bilaterally settle cases in the second list?
We might be able to settle a few of the cases bilaterally, perhaps only four-five. We are participants in 20 cases and not the lead banker in any of these.
In the first list of 12 cases (referred by banks on RBI order to NCLT for insolvency proceedings), how much was your exposure and how are you providing for these accounts?
Of those 12 cases, we had exposure in nine, to the tune of ~11,000 crore. For this ~11,000 crore, we were required to make incremental provisioning of ~1,080 crore in the current financial year. Of this, I had provided for ~830 crore till September; we front-loaded the provisioning. This means I have only ~250 crore left, which we can very comfortably do.
Lenders have taken huge haircuts (arrears writeoff) in some of the cases resolved through NCLT. How much haircut are you willing to take?
Now, the question of willingness is not there. It will happen as per the process, whatsoever the decision given. The right estimate is difficult because each is a unique case. However, by and large, the general assessment is that of our nine cases in the first list, most of the money — ~9,000 crore — is locked in five steel (companies’) cases. All these five steel assets are already under advanced stages of Expressions of Interest (EoIs) and bidding; a good number of EoIs and bidding have been received. That sector is looking for a very good upside because of the government’s infrastructure push. Also, the government has imposed minimum import prices and anti-dumping duties. So, the steel sector looks bright for the future. I hope we will be able get better resolution and might not have to take huge cuts.
How will the recent amendments to the Insolvency and Bankruptcy Code, of tightening the rules on promoters bidding for their companies, impact the process?
There will be challenges in valuation but it will give a good message to those who do not comply with financial discipline or who default. In the long term, this will give good signals to corporates, that if you do not perform, if you do not meet your financial commitments, you will not be able to retain your assets.
What is the plan for stake reduction in UTI Mutual Fund?
We are not the sole investors. There are four others, too. I think a meeting of the investors will take place in April and a call will be taken at that time. We might plan to go for listing (of the shares).
On consolidation, if you were to merge, what kind of synergies will you look at?
PNB is the second largest, after State Bank of India. I don’t think we will be looking for any merger. But, if the government says (you must) or comes out with a road map, we will go for geographical synergies. In the south, we have little presence and so, we might opt for it.
Depending only on a nudge or advice from the government?
They are not going to give us advice. They are going to give us options.
How soon may we expect consolidation?
I can’t say. We only listen (to what the government is planning) from the media. There is nothing (officially) on the cards.
How much are you expecting out of the (government’s) recapitalisation plan?
We have not got any number. We are not dependent on the government for capital. We have proved it. My capital adequacy ratio, CET-1, is above 9. The requirement is 8.
So, you don’t require recap bonds?
Not for existing ones. Maybe if I want to go for future business, I might require it. We are adequately capitalised for 2018-19, if we have to grow at the present rate.
What about selling stake in noncore assets?
Whatever we committed, we have done better than that. We have already sold 5.9 per cent stake in PNB Housing Finance, getting ~1,321 crore from it. We have also exited from PNB Principal, where we’re going to get ~125 crore. So, ~1,450 crore we have already disinvested and we’ll be getting that money. Of which, ~1,325 crore we have already received; the rest we will be receiving in the next few weeks.
Any other asset sale this financial year?
We are thinking of putting some of the fixed assets for sale. We have a lot of these and a lot of properties. Some of the properties we are not using might be put on sale.
Any estimates?
It is work in progress. Hopefully, we’d be raising another ~500 crore.
What about your British subsidiary, PNB International?
We have been able to convert it into a profit-making centre. We have an opportunity to disinvest in it but, right now, it is only a turnaround. We would first like to stabilise it and only then unlock the value. We will then get better value.
Your plans for branch rationalisation?
That exercise is on. We have given notices to all loss making branches that if they make turn around within a year, okay; else, we will look for options on their mergers. We are working on roughly 300 branches and not all of these are loss making. Some are marginally profitable. So, we are working on all those plans; if they are able to turn around, it’s okay. Otherwise, we will have to close (these). All are domestic. We have a total of 7,000 branches.
What about branches abroad?
We have already decided to close down two of our offices in Australia and China, in Sydney and Beijing, respectively.
Beside branches, what rationalisation are you looking at, say, in ATMs?
We have reduced to 900 ATMs and relocated many of these. Ultimately, profit is now going to be in the forefront. Whichever vertical, service or product is not contributing to profitability, we are analysing and redefining.