PNB to sell its 3.3% stake in Icra

Punjab National Bank (PNB) has put up for sale its 3.33% stake in ratings agency Icra, according to a sale document. The bank has appointed PNB Investment Services the merchant banker for the sale. The last date for submission of bids is June 27.

The sale is likely to fetch the lender around Rs 108 crore, based on the floor price formula for the sale, which, according to the sale document, will be “at a price not less than the average of the weekly high and low of the closing prices of the equity shares of the same class quoted on the stock exchange during the two weeks preceding the relevant date (June 26)”.

PNB is one of the four public sector banks (PSBs) that are left with less than 1% of their capital base for lending after taking care of regulatory capital requirements under Basel-III. Reeling under the impact of the Nirav Modi fraud, PNB reported a capital adequacy ratio (CAR) of 9.2% at the end of March. It is widely expected to be the next lender to be brought under the Reserve Bank of India’s (RBI) prompt corrective action (PCA) framework.

The country’s second-largest public-sector lender had reported a net loss of Rs 13,417 crore in the March quarter of FY18 — the largest quarterly loss in the history of Indian banking as the withdrawal of restructuring schemes for stressed assets and the Nirav Modi fraud took their toll. In the same quarter last year, the bank had posted a net profit of Rs 262 crore.

PNB needs to aggressively raise capital to protect its tier-1 ratio, which slipped below 6% in Q4, in the quarters ahead. In a post-results note, brokerage Kotak Institutional Equities (KIE) wrote that there may be further deterioration in PNB’s tier-1 ratio. “The bank has consumed a lot more capital and there would be further impact on tier-1 ratio in the ensuing quarters till the balance sheet is stabilised,” it wrote, adding, “The drop in tier-1 ratio to under 6% would result in a steep contraction in book value per share, negating our previous argument for a positive outlook at this time of the cycle.”