PSU banks announce share-swap ratios ahead of April 1 merger

Following the footsteps of State Bank of India and Bank of Baroda, the boards of 10 public-sector banks on Thursday approved mergers and issued share-swap ratios to create four large banks in the economy.

The four anchor banks will be Punjab National Bank, Canara Bank, Union Bank of India, and Indian Bank. The merger will be effective from April 1.

Last year, Bank of Baroda took over Vijaya Bank and Dena Bank. Before that, State Bank of India (SBI) had merged all its five associate banks with itself to enter the global top 50 banks’ list in terms of size. Punjab National Bank (PNB) will merge with United Bank of India and Oriental Bank of Commerce to create the largest bank in the country after State Bank of India.

According to notifications to the stock exchanges, Delhi-based PNB will issue 1,150 shares for 1,000 shares of Oriental Bank of Commerce, and 121 shares for 1,000 shares of United Bank of India.

Mumbai-based Union Bank of India will take Andhra Bank and Corporation Bank. Union Bank of India will issue 325 shares for 1,000 shares of Andhra Bank, and 330 shares for 1,000 shares of Corporation Bank.

Bengaluru-based Canara Bank will issue 158 shares for 1,000 shares of Syndicate Bank.

Allahabad Bank said for every 1,000 shares (face value Rs 10) of Allahabad Bank, there would be 115 shares (face value Rs 10) of Indian Bank.

The Union Cabinet had approved the consolidation to build the mega banks “to create more efficient and bigger public sector banks in the challenging environment to meet the credit needs of a growing economy and to achieve operational efficiency by scale of business”. The amalgamation will lead to a wide geographical reach, technology adaption, and, more importantly, better utilisation of scarce capital.

A grievance redress system has been put in place, and a committee has been formed headed by a retired judge. If shareholders have any issue with the swap ratio — for example, if they feel they didn’t get enough time or if they need information — they can raise it. This is the board-approved swap ratio.

“After the committee receives all the grievances, it will have seven days to recommend changes, if needed, which will be the final swap ratio,” said a top official of a PSB to be merged.

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Corporation Bank Q3 net ptofit jumps on higher interest income

Public sector lender Corporation Bank on Friday said its consolidated net profit increased seven fold to Rs 420.83 crore in third quarter ended December 31, 2019 on higher interest income, albeit provisions for bad loans surged. The bank had posted a net profit of Rs 59.94 crore during the corresponding period a year ago.

Income increased to Rs 6,051.93 crore, from Rs 4,112.29 crore, the lender said in a regulatory filing.

On a standalone basis, the net profit increased to Rs 420.68 crore in third quarter ended December 31, 2019 from Rs 60.53 crore a year ago.

Notwithstanding that the bank's bad loan ratio has come down from the year-ago level, still it continues to remain elevated, the filing said.

In absolute terms, the gross NPAs stood at Rs 19,557.16 crore in the quarter under review, as against Rs 21,921.42 crore a year ago. Net NPAs were valued at Rs 6,321.81 crore, down from Rs 13,521.22 crore.

Despite fall in bad loan provisions, the bank kept aside a higher provision of Rs 1,300.35 crore for the quarter, compared with Rs 842.27 crore reserved for the year-ago quarter, the filing said.

During the quarter ended December 2019, the bank raised Basel III compliant tier II bonds amounting to Rs 1,000 crore, it added.

For the accounts covered under the provisions of Insolvency and Bankruptcy code (IBC), the bank has made a total provision of Rs 7,404.96 crore (100 per cent of gross NPAs) including additional provision of Rs 905 crore in said accounts as on December 31, 2019, the filing said.

For other accounts pending resolution, under the provisions of IBC, the bank is holding total provision of Rs 14,435.24 crore (96.35 per cent of gross NPAs), Corporation Bank said.

As per RBI norms, the bank has restructured and retained advances of Rs 632.05 crore as standard assets as on December 31, 2019 and made provision of Rs 31.60 crore as on December 31, 2019 in respect of such borrowers.

On migrating to the lower tax regime which was introduced by the government for the corporate sector in September, Corporation Bank said it is currently in the process of evaluating this option.

Provision coverage ratio of the bank at end of December 31, 2019 was 84.58 per cent as compared to 66.13 per cent as on December 31, 2018.

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Corporation Bank net profit rises 26%

State-owned Corporation Bank on Wednesday reported a rise of 26 per cent in its net profit to Rs 129.76 crore for the second quarter ended September 30, on the back of lower provisioning for bad loans. The bank had posted a net profit of Rs 103.01 crore in the corresponding quarter of 2018-19.

Its total income also rose to Rs 4,712.97 crore in the second quarter of 2019-20 from Rs 4,216.79 crore in the corresponding quarter of 2018-19, the bank said in a regulatory filing.

The lender's asset quality witnessed improvement as the gross non-performing assets (NPAs) fell to 15.43 per cent (Rs 20,822.83 crore) of the gross advances at the end of September 2019, compared with 17.46 per cent (Rs 21,714.16 crore) by the year-ago period.

Net NPAs or bad loans fell substantially to 5.59 per cent (Rs 6,751.20 crore), against 11.65 per cent (Rs 13,534.01 crore) a year ago.

This resulted into lesser provisioning for bad loans and contingencies for the quarter at Rs 789.45 crore from Rs 808.32 crore a year ago. Of this, provisioning for bad loans was Rs 658.09 crore, down from Rs 728.56 crore a year ago.

The bank said it carried a provision of Rs 28.32 crore as on September 30, which is 5 per cent of outstanding food credit availed by the Punjab government, as per the Reserve Bank of India.

Further, the bank said it continues to hold provisions additionally made as of March 31 in respect of eligible National Company Law Tribunal (NCLT) accounts, those under NPA category as well as for under standard assets accounts.

The bank has reversed deferred tax assets of Rs 119.36 crore, during the half year ended 30th September, 2019. On 20th September, 2019, vide Taxation Laws (Amendment) Ordinance 2019, the Government of India inserted Section 115BAA in the Income Tax Act 1961, which provides domestic companies a non-reversible option to pay corporate tax at reduced rates effective 1st April, 2019 subject to certain conditions," the lender said.

It also added that the bank is currently in the process of evaluating this option.

Corporation Bank continues to recognise the taxes on income for the quarter and the half year ended September 30, 2019, as per the earlier provision of tax laws.

Provision coverage ratio of the bank as of September 30 was 83.95 per cent, compared to 65.47 per cent a year ago.

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Corporation bank Q1 result, net profit up

Corporation Bank registered a net profit of ₹103.27 crore in the first quarter of 2019-20 as against a profit of ₹84.96 crore in the corresponding period of the previous fiscal, recording a growth of 21.55 per cent.

The gross NPA (non-performing asset) of the bank stood at 15.44 per cent (17.44 per cent), and net NPA at 5.69 per cent (11.46 per cent) during the period.

The amount of gross NPA came down to ₹20,913.07 crore (₹21,753.21 crore), and net NPA slipped to ₹6,907.51 crore (₹13,333.27 crore) during the first quarter of 2019-20.

The provisions (other than tax) and contingencies stood at ₹729.53 crore (₹1,611.93 crore). Of this, the provisions for NPAs stood at ₹715.98 crore (₹1,508.42 crore) during the quarter.

The bank registered a net interest income of ₹1,298.67 crore (₹1,564.21 crore) and the other income of ₹432.32 crore (₹787.33 crore) during the period.

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Four PSU Banks fined for violation of KYC norms by RBI

The Reserve Bank of India (RBI) has imposed a penalty of Rs 1.75 crore on four public-sector banks, including PNB and UCO Bank, for non-compliance with KYC requirement and norms for opening of current accounts. While PNB, Allahabad Bank and UCO Bank have been fined Rs 50 lakh each, a Rs 25-lakh penalty has been imposed on Corporation Bank.

Giving details, the RBI said the penalty has been imposed for non-compliance with certain provisions of directions issued by it on know your customer norms or anti-money laundering standards and opening of current accounts. The action, however, is based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the banks with their customers, the RBI added.

In a stock exchange filing on Tuesday, UCO Bank said, “We inform that the RBI in exercise of powers conferred under Section 47 (A) (1) (c) read with Section section 51 and 46 (4) (1) of the Banking Regulation Act, 1949, has imposed a penalty of Rs 5 million (Rs 50 lakh) on UCO Bank for non-compliance of RBI directives on ‘KYC norms/AML standards/CFT/obligation of banks and financial institutions under PMLA 2002’ and also on ‘opening of current accounts by banks — need for discipline’.”

Similarly, Allahabad Bank, in a stock exchange filing, said the RBI has imposed a penalty of Rs 50 lakh on the bank for non-compliance of the directions issued the by RBI on “KYC norms/AML standards” and “opening of current accounts”.

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Big bank theory: This two PSU Banks may merge into Oriental Banks of Commerce (OBC)

With a heavy mandate to push reforms, the BJP-led government may soon kick-start the next phase of consolidation in the public-sector banking space with an amalgamation of three lenders — Oriental Bank of Commerce (OBC), Indian Bank and Corporation Bank.

Banking sources told FE that OBC has sought the finance ministry’s approval to combine with Indian Bank and Corporation Bank. The ministry will consider OBC’s proposal and take a view soon, one of the sources said. However, there is no formal announcement from the finance ministry on the matter yet. Another source said the government may infuse `40,000-50,000 crore into public-sector banks (PSBs) this fiscal, having already provided `1,06,000 crore in FY19.

The merger, if implemented, will be part of the government's efforts to create a few but strong banks with much larger balance sheet to support the rising credit appetite of the fast-growing economy and enable optimum utilisation of resources.

The successful experience of merging State Bank of India with five of its subsidiaries and Bharatiya Mahila Bank, and the amalgamation of Bank of Baroda, Vijaya Bank and Dena bank have given the government confidence that more such consolidation exercises can be handled without any hiccups.

OBC — which was facing restrictions under the central bank's Prompt Corrective Action (PCA) framework until early February —recorded a net profit of Rs 201.5 crore in the March quarter from a net loss of Rs 1,650.22 crore a year earlier. Even sequentially, the profit surged 39%. However, Corporation Bank's losses zoomed to Rs 6,581.49 crore during the fourth quarter of FY19, against Rs 1,838.39 crore a year before.

Indian Bank saw a net loss of Rs 190 crore in the March quarter, against a net profit of Rs 132 crore in the same period last year. While the headquarters of OBC is in Gurugram, those of Corporation Bank and Indian Bank are in Mangalore and Chennai, respectively.

Earlier, there were reports of Punjab National Bank (PNB) amalgamating with OBC and some other smaller banks, such as Punjab & Sind Bank, Allahabad Bank and Andhra Bank. However, given that PNB is still not out of the woods, any such plan may wait until the bank's results for the first quarter of this fiscal are out. PNB recorded losses of Rs 4,750 crore in the March quarter, against a net loss of Rs 13,417 crore in the same quarter last fiscal when the Nirav Modi fraud came to light. It, however, had recorded a net profit of Rs 247 crore in the third quarter of FY19.

Upon amalgamation, the merged entity will have a combined deposits of `6.6 lakh crore and advances of Rs 4.8 lakh crore, said the sources. The net NPA ratio of OBC stood at 5.93%, while that of Corporation Bank and Indian Bank was 5.71% and 3.75%, respectively at the end of March.

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Corporation bank Q4 loss widens due to higher provisions

Corporation Bank Friday said its loss widened to Rs 6,581.49 crore during the fourth quarter ended March 31, mainly due to higher provisioning for bad loans.

The bank had reported loss of Rs 1,838.39 crore during January-March quarter of 2017-18.

The total income of Corporation Bank during the fourth quarter of 2018-19 stood at Rs 4,187.65 crore down from Rs 4,642.45 crore in the same period of the previous fiscal, the lender said in a regulatory filing.

The bank, however has reported reduction in non-performing assets (NPAs).

The gross NPA as a percentage of total advances was 15.35 per cent compared to 17.35 per cent during fourth quarter of 2017-18.

The bank has made a provision of Rs 8,505.87 crore for NPAs almost double from Rs 4,441.29 crore in the year-ago quarter.

Corporation Bank's net loss stood at Rs 6,325.29 crore during the year 2018-19, as against Rs 4,049.93 crore in the preceding fiscal.

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2 more PSU banks out of RBI’s PCA watch; one private bank also finds its way out

The RBI Tuesday lifted lending curbs on two more public sector banks (PSBs), Allahabad Bank and Corporation Bank, by removing them from its weak-bank watch list. Private sector Dhanlaxmi Bank too has been taken out of the Prompt Corrective Action (PCA) Framework. Earlier on January 31, Bank of India, Bank of Maharashtra and Oriental Bank of Commerce were taken out of the PCA Framework. In a statement, the RBI said the Board for Financial Supervision (BFS) reviewed the performance of banks under PCA and noted that the government has infused fresh capital on February 21 into various banks including some of the banks currently under the PCA framework.

Of these banks, Allahabad Bank and Corporation Bank had received Rs 6,896 crore and Rs 9,086 crore, respectively. Capital infusion, the RBI said, has shored up their capital funds and also increased their loan loss provision to ensure that the PCA parameters were complied with. "Accordingly, based on the principles adopted by the BFS in its earlier meeting dated January 31, 2019, it was decided in the meeting held on February 26, 2019 that Allahabad Bank and Corporation Bank be taken out of the PCA Framework subject to certain conditions and continuous monitoring," RBI said.

The gross non-performing assets of Corporation Bank stood at 17.36 per cent of the gross advances at the end of December quarter of this fiscal, up from 15.92 per cent in the same period of previous fiscal. For Allahabad Bank, the gross NPA rose to 17.81 per cent from 14.38 per cent a year ago. RBI further it has also been decided to take Dhanlaxmi Bank out of the PCA Framework, subject to certain conditions and continuous monitoring, as the bank is found to be not breaching any of the Risk Thresholds of the PCA Framework.

Dhanlaxmi Bank's gross non-performing assets (NPAs) rose to 8.11 per cent of the total advances, from 6.96 per cent at the end of the third quarter of 2017-18. RBI also it will continuously monitor the performance of the banks under various parameters," the central bank said. Five public sector banks -- United Bank of India, UCO Bank, Central Bank of India, Indian Overseas Bank and Dena Bank -- are still remain under PCA framework, which imposes lending restrictions and prevents them from expanding, among other curbs.

The PCA framework was one of the contentious issue between the government and the RBI. The government wanted the central bank to align the PCA framework to the global norms. The PCA framework kicks in when banks breach any of the three key regulatory trigger points -- namely capital to risk weighted assets ratio, net non-performing assets (NPA) and return on assets (RoA). Globally, PCA kicks in only when banks slip on a single parameter of capital adequacy ratio, and the government and some of the independent directors of the RBI board, like S Gurumurthy, are in favour of this practice being adopted for the domestic banking sector as well.

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