PNB plunges to 52-week low as bad loans mount

Last Updated: Wed, May 16, 2018 12:36 hrs
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Shares of Punjab National Bank plunged sharply right at the stroke of the opening bell on the Indian bourses on Wednesday morning. And, it was not shocking to see the stock sliding steeply, given the fact that the bank's net non-performing loans turned out to be significantly more than the bank's net worth by the end of the fourth quarter ended March 2018.

The stock tanked to a fresh 52-week low of Rs 74.30 on BSE and is currently at Rs 75.50, down 12.2% from its previous close.

On the National Stock Exchange, the stock declined to Rs 74.15 and is now down 12% at Rs 75.65. The stock was trading around Rs 231 in the last week of October 2017.

The stock has been sliding consistently since the fourth week of January this year, that is, around the time news about Nirav Modi's liablities to the bank started flooding the market.

On BSE, the PNB counter clocked a volume of about 6.17 million shares so far in today's session, about 5.4 times the average daily volume of 1.14 million shares.

On the National Stock Exchange, the PNB counter clocked a volume of 64.22 million shares so far in the session.

Punjab National Bank's asset quality has deteriorrated in the past few quarters. Over the last couple of years, following the central bank's directive that mandates banks to disclose all their bad and doubtful loans, several public sector banks have been reporting huge amounts of bad loans and Punjab National Bank figures among the banks that are worst hit due to heavy defaults by borrowers.

During the fourth quarter, the bank posted a net loss of Rs 13,417 crore. The bank made payments to the tune of nearly Rs 6600 crore to other banks to whom it owed money on underwriting commitments with regard to the letters of undertakings that were fraudulently issued to the Nirav Modi group. In the quarter ended March 2017, the bank had posted a net profit of Rs 262 crore.

The bank's gross non-performing assets grew to Rs 86,620.05 crore in the January - March 2018 quarter, from Rs 55,370.45 crore in the same period of the previous year, and Rs 57,519.41 crore in the quarter ended December 2017. Gross NPA ratio rose to 18.38% in the quarter ended March, from 12.53% a year earlier.

Punjab National Bank made provisions of Rs 20,353 crore towards bad loans in the fourth quarter ended March 2018. Out of this, the much talked about Nirav Modi scam accounted for about Rs 7580 crore, meaning the bank's lending moves left a lot to be desired.

Notwithstanding the infusion of Rs 5400 crore from the government and investment of Rs 5000 crore from qualified institutional investors, the bank's capital capital adequacy ration stood at 9.2% as of March 2018, just about the minimum regulatory requirement of 9%.

Besides Punjab National Bank, several other PSU bank stocks are down sharply today. 

Syndicate Bank has plunged more than 11%, Allahabad Bank is down 5% and Bank of Baroda is down 4.2%. 

Bank of India is lower by about 3%, Oriental Bank of Commerce is down 2.7% and Union Bank of India is declining 2.6%. IDBI Bank, State Bank of India and Indian Bank are also notably lower, while Andhra Bank and Canara Bank are down with modest losses.