The Indian bank
that saw its earnings wiped out by an unprecedented fraud aims to
report the nation’s biggest bank profit by selling some assets,
according to people familiar with the matter.
Punjab National Bank
is targeting net income of more than Rs 5,000 crore ($730 million) for
the three months through Sept. 30, boosted by asset sales and bad-loan
recoveries, the people said. Much of the record earnings will come from a
planned sale of PNB’s stake in its housing finance unit, they added,
asking not to be identified as the information is private.
The 124-year-old PNB is trying to regain its financial health and
credibility following the uncovering of a $2 billion fraud this year.
The scam caused it to slip one spot to become India’s third-largest
state-run bank by assets and analysts, including those at Goldman Sachs Group Inc., cut profit estimates for the lender.
PNB had reported India’s biggest ever bank loss of Rs 13,420 crore
in the quarter ended March 31 as it had to account for the fraud. It has
already provided for half of the roughly Rs 14,400 crore it owes other
banks to make good for the scam, and said the rest will be paid over
three quarters -- approximately Rs 2,400 crore each quarter if spread
equally.
PNB will probably report a loss of Rs 2,400 crore for the three
months ended June 30, according to the average of 11 estimates in a
Bloomberg survey. This narrowing is expected to be led by a drop in bad
loans following the sale of bankrupt Bhushan Steel.
For the current quarter, the lender expects profit will be further
boosted by more than Rs 8000 crore it estimates to get by selling
so-called non-core assets, the people said. This includes its stake in
PNB Housing Finance Ltd., they added. If PNB does report net income of
50 billion rupees, it would be the biggest quarterly profit in India’s
banking sector.
A PNB spokesperson didn’t immediately answer two phone calls and an email.
PNB and Carlyle Group
plan to jointly sell at least 51 percent of PNB Housing Finance, the
bank told the stock exchange on Wednesday, without sharing more details.
Together, these two investors hold more than 60 per cent of PNB Housing
Finance, data compiled by Bloomberg show, and PNB’s roughly 33 percent
holding is worth about 68 billion rupees based on Friday’s share price.
“It is reasonable to assume that the stake sale in PNB Housing could
happen around the prevailing market prices,” said Gaurang Shah, chief
investment strategist at Geojit Financial Services Ltd. in Mumbai.
“However, this one-off gain would not change the outlook for Punjab
National Bank much.”
The New Delhi-based bank also aims to cut its risk-weighted assets
by more than Rs 20,000 crore and halve its net bad-loan ratio from 11.2
per cent over the year through March 2019, the people said.
By Siddhartha Singh
Source-Economic Times
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