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Journalism of Courage
Punjab National Bank is planning to sell its entire stake in its subsidiary PNB Housing Finance and has held discussions with HDFC and Kotak Mahindra Bank for a possible sale, a source familiar with the development said. PNB, which holds 33 per cent stake in the subsidiary, expects the transaction to be completed by end of July-September quarter and could fetch it around Rs 3,500-4,000 crore, the source said. It is also learnt that PNB is also in discussions to sell its stake in PNB MetLife and is also put on block its old headquarter in Delhi.
Hit by a loan fraud of over Rs 14,000 crore that has eroded its capital adequacy and profitability, the lender is planning to cut stakes in its subsidiaries and sell non-core assets to improve its capital base. In response to a query from the BSE whether HDFC, Kotak Mahindra Bank are eyeing controlling stake in PNB Housing Finance, the company said on Monday: “We would like to state that the company is not aware of any such negotiations.” In a clarification to stock exchanges on Monday, Housing Development Finance Corporation (HDFC) said it “had no meeting with the management of PNB Housing Finance Limited and is not looking to acquire any stake” in the company.
PNB will also pare its stake in PNB MetLife Insurance but cannot completely exit due to some conditions in joint venture with insurer.
Excluding its subsidiary PNB Gilts, which the lender plans to keep as it is vital to its treasury operations, the bank is looking to cut stakes in all other subsidiaries. Also on the block is the bank’s old headquarters at Bhikaji Cama place in Delhi, which could fetch it around Rs 1,000 crore, the source said.
“The sale of property at previous headquarters is facing some difficulty as it is not freehold and there are issue around the title. But we are in process of getting these resolved. The property may be sold to a government entity,” the source said. With the government rejecting its demand for higher capital in this fiscal year, the bank is stepping up loan recoveries and sale of non-core assets to boost its capital base. The bank is targeting to complete recoveries of Rs 8,000 crore by June-end, half of which will be added to its profitability.
The lender last month posted a net loss of Rs 13,416.91 crore for the January-March quarter, the biggest ever by any domestic lender, as provisions against expected loan losses tripled and it recorded an across the board deterioration in its performance. Its Gross non-performing assets ratio jumped to 18.38 per cent of gross advances at the end of March 2018, up from 12.53 per cent a year ago. Net NPAs also soared to 11.24 per cent.
With regards to provision made for the loss incurred on account of Letter of Undertaking fraud perpetrated by diamantaire Nirav Modi in connivance with certain bank officials, the bank provided for Rs 7,178 crore in the fourth quarter. This provision is 50 per cent of the total amount of Rs 14,356 crore and the remaining amount will be covered in three quarters of current financial year. The bank needs to sell non-core assets to improve its capital base.
Earlier this year, PNB sold its entire stake in the mutual fund joint venture with Principal Financial Group to give the latter full ownership of Principal PNB Asset Management Co. and Principal Trustee Co. Pvt. Ltd. PNB owned 21.38 per cent stake in Principal PNB Asset Management Co and 30 per cent equity in Principal Trustee Co. The bank is also looking to sell its stake in overseas subsidiaries and joint ventures.
