PNB banking on non-core asset sales

Lender eyes capital in fusion from govt

Hit by the Nirav Modi fraud, Punjab National Bank (PNB) expects the Union government to come to its rescue by infusing a higher share of capital in the bank in the second round of recapitalisation lined up for the present financial year. Besides, the bank has lined up sale of non-core assets worth around ~80 billion this financial year, in a bid to avert the Reserve Bank of India’s (RBI’s) prompt corrective action (PCA).

“Though we haven’t approached the finance ministry officially yet, some support from the government in the form of capital infusion will be a positive for us,” said a senior PNB executive.

Under the first tranche of recapitalisation, the Union government infused ~800 billion through bonds in public sector banks last financial year. Among the comparatively healthier banks or those which are not under the PCA framework, PNB received the second-highest capital infusion of ~54.7 billion, after State Bank of India (~88 billion).

“However, the government’s capital infusion and our own fundraising through qualified institutional placement (QIP) has gone down the drain because of the fraud case and non-performing assets (NPA) provisioning,” the PNB official said. PNB had raised ~50 billion through a QIP in FY18.

Experts said the bank has two options— either raise capital or to recover bad loans — with the latter being a longdrawn process.

“PNB will need to definitely raise capital. They still need to make a lot more provisioning (against the fraud and the RBI’s new norms) this year. Also, better recovery from National Company Law Tribunal will help,” said Karthik Srinivasan, senior vice president–group head, financial sector ratings at ICRA Limited.

To raise funds, PNB plans to concentrate on divesting its “attractive” non-core assets and subsidiaries worth around ~80 billion in FY19. The bank may list PNB Metlife on the stock markets by the second quarter of this financial year, a bank executive said. It has a 30 per cent stake in PNB Metlife. “We have huge investments in the

treasury, we can shed some stake in PNB Housing Finance Limited as well and go for sale of non-core assets, such as properties and fixed assets in Delhi. This will give us money in the range of ~60-Rs 80 billion,” the bank executive said. The bank will re-align its business to put special focus on growing business from its rural and semi-urban (RUSU) branches.

EDattachesover~1.71 billion assets of N ir av Mo di In fresh action against Nirav Modi, the Enforcement Directorate has attached assets worth over ~1.71 billion “beneficially owned” by the absconding diamantaire in connection with its money laundering probeintheover$ 2billionPNB fraud case.