No Need to Approach Govt for Capital; Bank to Raise Funds from Market: PNB MD

The country’s second largest state-owned lender Punjab National Bank on Monday said it does not envisage approaching the government for capital support rather it intends to raise funds from the market, which seems to have appetite for the public sector banking space. The bank has shareholders’ approval for raising Rs 14,000 crore, comprising Rs 7,000 crore of the equity alone, from the market to meet COVID-related impact and finance growth, Punjab National Bank (PNB) Managing Director S S Mallikarjuna Rao said in a virtual interaction with reporters.

“As on today, it does not appear (approach government for capital). If you look at market appetite also there is intent to contribute to public sector space in general,” he said. This is evident from the recent issuance of Tier II bonds of Bank of Baroda and PNB as coupon rates were reasonable, he said.

“There is an appetite in the market. So, unless we test in the market, it would not be appropriate for us to think of government for contribution…We are confident of going to the market with respect to Tier II and Tier I bonds during Q2 and Q3 while we are looking at the end of Q3 or during Q4 for QIP (qualified institutional placement),” he said. Asked about the subdued share price of the bank, he said the government has 85.5 per cent stake in the bank leaving less than 15 per cent for the market to trade.

Shares of the bank were hovering around Rs 65 level during the last week of August 2019 as compared to Rs 35.30 on Monday on the BSE. “The government shareholding still remains at 85.5 per cent. In spite of showing better performance, the kind of stock available in the market is very less, the possibility of price moving up aggressively is not expected unless the stake in the market increases,” he said.

Price to book value is roughly about 59-60 per cent currently. On the other avenues of fund mobilisation, he said the bank is looking to raise Rs 500 crore from the sale of real estate during the current fiscal.

Rao said that the bank is expecting Rs 6,000-8,000 crore from the resolution cases pending before the National Company Law Tribunal. He also said the bank has decided to infuse Rs 600 crore in its mortgage arm PNB Housing Finance through preferential issue or a rights issue subject to the RBI’s approval.

Asked about the outlook for the current financial year, Rao said the bank aims to earn moderate profit every quarter. “We like to be in profit in every quarter though moderately. We do not like to have high profit because we want to strengthen the balance sheet by creating more and more provisions by showing marginal profits. For June quarter the bank posted (profit of) Rs 308 crore, remaining quarters are on the similar lines,” he said.