Companies & Sectors
PNB reports biggest quarterly losses in banking history

Public sector lender Punjab National Bank (PNB) on Wednesday posted massive net loss of Rs.5,367.14 crore for the fourth quarter ended March 2016 caused by provisioning for bad loans.

This is the highest quartely loss reported by any bank in India, as non-performing assets or bad loans soared. 

Banks have been forced by the Reserve Bank of India to provide higher amounts for the bad loans, thus ensuring that the red ink spreads across their balance sheets.

The bank had posted net profit of Rs.306.56 crore in the corresponding period of 2014-15, according to regulatory filing.

The bank reported its bad loas at Rs 55,818 crore compared to Rs 34,338 crore in the previous quarter. As percentage of total loans, the non-performing assets amounted to 12.9.

“This is by far the highest ever increase in NPA (non-performing aset) recorded by any bank,” Siddharth Purohit, senior equity research analyst -- banking, Angel Broking told IANS.

It is the much higher provisioning that PNB allotted in the fourth quarter to balance the high NPAs that lead to such a massive loss, he said. 

The bank reported provisions (other than tax) and contingencies at Rs.10,485 crore in the fourth quarter of 2015-16. The amount of of net NPAs were at Rs.35,422 crore for the quarter ended March 31, 2016.

“The bank intentionally took much higher provisions for cleaning up of the balance sheet. Naturally they had to take provisions for the high NPAs as they had not accounted for the asset quality review in Q3 of the previous fiscal,” Purohit said.

Reserve Bank of India had given a deadline for all banks to complete their asset quality review by March 31, 2016.

Although PNB has not disclosed the NPAs sector-wise, Angel Broking believes it is metal and commodity sector that is responsible for the bank's high NPAs.

“PNB has come out with numbers much lower than our and street’s expectations. The point of worry is that the bank believes the cleaning up exercise of balance sheet is not over. We believe pain to continue in FY17 also, with regards to asset quality,” he said.

“Going ahead certainly this kind of loss will not be there for the bank. Though asset quality has still not stabilised, the last part is done,” he added.

The total income of PNB has decreased to Rs.13,276.19 crore for the quarter ended March 31, 2016 from Rs.13,455.65 crore in the quarter ended March 31, 2015, the BSE filing said.

For the entire fiscal 2015-16, the bank has posted a net loss of Rs.3,974.39 crore for the year ended March 31, 2016 as compared to net profit of Rs.3,061.58 crore for the year ended March 31, 2015, PNB said.

Total income for 2015-16 has increased to Rs.54,301.37 crore from Rs.52,206.09 crore for the year ended March 31, 2015.

PNB posted a consolidated net loss of Rs.3,689.77 crore for the year ended March 31, 2016 as compared to net profit of Rs.3,399.60 crore for the year ended March 31, 2015, it said.

PNB stock closed on Wednesday at Rs.76.20 a share, up 2.40 points, or 3.25 percent, over its previous close on the BSE.

 

Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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COMMENTS

Ramesh Poapt

7 months ago

PNB was number 1 in all 20 banks(best) a decade back.
It is again No.1, but....OMG........ in NPA/loss !

Nataraj S K

7 months ago

I had expected this sort of a situation to arise six years back. The shoving of NPAS under the carpet, and concealing them had to, one day,come out in the open. This has started happening in the last few quarters. This is no surprise at all to me. Banking has to be done professionally,and not in an amateurish manner. The system stinks,and as a consequence,the economy is at grave risk and danger. The RBI Governor needs to be complimented for the various clean-up measures initiated,and for also changing the way the management heads,like CMD,EDs. of the Bank are picked. It will be foolish to expect results to follow immediately,as the malaise is very deep-rooted. It will take a couple of years or more to ensure that health is restored in the Banking system. The continuance of Raghuram Rajan will give a boost to the restoration and revival of the banking sector. Calls for his sacking should simply be ignored,as they are only due to political reasons. As the adage goes,good economics is bad politics. I only hope good sense prevails on the powers that be,to see reason and to take right decisions in a timely, effective manner.

Nifty, Sensex still trendless – Wednesday closing report
We had mentioned in Tuesday’s closing report that Nifty, Sensex were trendless. The major indices in the Indian stock markets reversed direction and made minor losses over Tuesday’s close after falling sharply at the open. Trading volumes were lower than usual. The trends of the major indices in the course of Wednesday’s trading are given in the table below:
 
 
Negative Asian and US indices and disappointing quarterly results, pushed the Indian equity markets down on Wednesday. This led the key indices to trade in the red during the mid-afternoon trade session, as selling pressure was witnessed in automobile, banking and information technology (IT) stocks. The Asian and domestic markets receded on the back of renewed fears of a US rate hike. In addition, reduced chances of the Reserve Bank of India (RBI) to further ease its key lending rates during the upcoming monetary policy review subdued investors' sentiments.
 
Public sector lender Punjab National Bank (PNB) on Wednesday posted a massive net loss of Rs.5,367.140 crore for the fourth quarter ended March 2016 caused by bad loans, as compared to net profit of Rs.306.56 crore in the corresponding period of last fiscal. For the entire fiscal 2015-16, the bank has posted a net loss of Rs.3,974.39 crore for the year ended March 31, 2016 as compared to net profit of Rs.3,061.58 crore for the year ended 31 March 2015, PNB said. PNB shares closed at Rs76.20, up 3.25% on the BSE.
 
The Foreign Investment Promotion Board (FIPB) has approved Rs.60.73 crore worth of foreign direct investment (FDI) proposals of Wockhardt, Aurobindo Pharma and Advanced Enzyme Technologies. "The government has approved three proposals of FDI amounting to Rs.60.73 crore approximately," the finance ministry said in a statement here on Wednesday. The decision was taken at a FIPB meet held on April 29, the statement said. The FIPB has also recommended to the Cabinet Committee on Economic Affairs (CCEA) for approval the Axis Bank proposal to increase the foreign investment limit in the bank to 74% from the current 62%, the statement said.  The Axis Bank's proposal involves FDI of Rs.12,973.14 crore, it said. Wockhardt shares closed at Rs952.95, up 0.61% on the BSE. Aurobindo Pharma shares closed at Rs783.55, up 0.93% on the BSE. Axis Bank shares closed at Rs501.35, down 0.33% on the BSE.
 
Higher provisions for bad loans and contingencies turned state-run Syndicate Bank into red, with a whopping Rs.2,158 crore net loss for fourth quarter of 2015-16 from net profit of Rs.417 crore in like period year ago on standalone basis. "Total income, including interest for quarter under review also decreased marginally (1.1%) to Rs.6,525 crore from Rs.6,599 crore in same period year ago on standalone," the Manipal-based bank said in a statement here on Tuesday. For 2015-16 too, the bank posted a net loss of Rs.1,644 crore as against net profit of Rs.1,523 crore in 2014-15 on standalone basis. "Total income for fiscal under review, however, increased 8.4 percent to Rs.25,707 crore from Rs.23,725 crore year ago," the statement said. On consolidated basis, net loss for 2015-16 was Rs.1,517 crore as against net profit of Rs.1,664 crore in FY 2015. Total income (consolidated), however, increased to Rs.25,831 crore for FY 2016 from Rs.23,865 crore in 2014-15. "Provisions (other than tax) and contingencies shot up 237% year-on-year to Rs.2,412 crore in fourth quarter from Rs.715 crore in like period year ago and 116% YoY to Rs.4,348 crore for fiscal from Rs.2,011 crore in FY 2015 on standalone basis," the bank said in its profit-and-loss statement. Gross non-performing assets (GNPAs) ratios for the last quarter and fiscal doubled to 6.7% from 3.13% in like period year ago and net performing assets (NPAs) ration zoomed to 4.48% from 1.90% in same period year ago. "Cash recovery in NPA was Rs.2,702 crore in FY 2016 as against Rs.2,195 crore in FY 2015," the statement added. Syndicate Bank shares closed at Rs68.45, up 2.93% on the BSE.
 
The Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) on Tuesday decided shift as many as 51 scrips to the trade-to-trade (the 'T' group) segment, while NSE would move 10 stocks to the category. The scrips to be moved to the restrictive segment on both the bourses include Resurgere Mines & Minerals, Sezal Glass, HMT Ltd, Suryajyoti Spinning Mills, Capital Trust Ltd, Kemrock Industries and Exports, Lumax Automotive Systems, Acropetal Technologies Ltd, Spectacle Ventures Ltd and others. No speculative trading is allowed and delivery of shares and payment of consideration amount are mandatory in the segment.
 
The top gainers and top losers of the major indices are given in the table below:
 
 
The closing values of the major Asian indices are given in the table below:
 

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COMMENTS

Amit Dhur

6 months ago

Nifty BUY trend continues, 8336 on the cards

Stock Market Today by Shailesh Saraf 30th May 2016
Indian Market Outlook:
FII continued their buying spree across all segments in the Indian markets after buying worth Rs.15747 Cr in Index Options, worth Rs.8474 Cr in Index Futures and worth Rs.1095 Cr in the cash segment in last 5 days.
Nifty the Indian benchmark index saw consolidation at 8200 levels after 7720 the low made on Tuesday 24th, the rally of more than 500 points in four trading sessions with the breakout of critical level of 8000 and the huge buying of FII and PRO buy in future and options which suggests that 8336 are in the cards to come.

International Market Outlook
The Asian markets continue their rally after trading in green today as well. The US markets were closed yesterday for Memorial Day, has also given a breakout of 2100 levels in future index. Non-farm payroll data which is one of the major data events is on Friday which would bring in further stimulus for the FED rate hike scheduled for the June 15 meeting. Traders would also keenly watch the developments around the BREXIT which is scheduled for the 23rd June. FII Index Future Open Interest for the Week FII Options Open Interest for the Week.
https://www.dynamiclevels.com/en/shailesh-saraf-stock-market-today-310516

SBI merger with associates: Nothing to be excited about

State Bank of India (SBI), the country's largest state-run lender is checking out the possibilities of acquiring its five associate banks, including assets and liabilities. However, this merger will not bring any significant benefit to SBI, in fact it will lead to a pre-tax hit of around 15% to 17% on the lender's consolidated net profit, says Religare Capital Research Ltd.

 

In a research note, Religare says, "In the previous mergers of State Bank of Indore in 2010 and State Bank of Saurashtra in 2008, SBI incurred losses on amalgamation of Rs890 crore and Rs610 crore respectively, largely on account of pension liability. These mergers occurred over five years ago, and the outgo at this juncture will be much higher, resulting in a one-time hit on profitability at a time when the bank (SBI) is already reeling under the weight of non-performing assets (NPAs). We believe the impact due to one-time pension cost will be Rs3,500-Rs4,500 crore, translating into 15-17% of pre-tax consolidated profit for SBI."

 

SBI's associate banks include State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore.

 

SBI’s employees are covered by both pension and provident fund, whereas not all employees of associate banks are eligible for pension – this implies an additional pension cost for SBI.

 

Religare says, over the past three years, the employee base (standalone) of SBI has declined by 10% due to control over cost and adoption of technology. "However, we see no scope for reducing the employee count after merger even if warranted. Thus, the benefits of lower operating cost and synergy from rationalisation of branches will occur only in the long term and will depend on management efficiency," it added.

 

There is no material difference in asset quality and capital ratios between parent SBI and associate banks, Religare says, adding, "We see no improvement in asset quality ratios and capital levels for SBI after the merger as its gross NPA (standalone at 5.1% and associate banks at 5.23%) and tier 1 capital (standalone at 9.6% and consolidated at 9.4%) are marginally lower on a consolidated basis as compared to standalone. In addition, restructured assets on a consolidated basis are also higher."

 

SBI is also trying to acquire Bharatiya Mahila Bank (BMB), which was set up as first bank for women in India. SBI says it would explore this acquisition once the central government gives an in-principle approval to start negotiations with BMB.

 

Religare says, "The acquisition of BMB, which has around 85 branches and equity capital of Rs1,000 crore with Rs200 crore loans, will increase SBI's group tier 1 capital by Rs100 crore."

 

While SBI is getting ready to merge its associated banks with itself and acquire BMB, this is not a precursor for mergers of other state-run banks, Religare says.

 

According to the research note, the merger between SBI and its associate banks is the easiest among state-run banks, as all of these entities are on the same technology platform and have the same employee culture. "A similar initiative would be a difficult, tedious process for other state-run banks which could create employee turmoil and waste management bandwidth for two-three years," it added.

 

Due to the move to merge associate banks with itself, SBI is facing downside risk for its earnings for FY2017, mainly due to one-time merger related costs, Religare concluded.

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COMMENTS

Ramesh Poapt

7 months ago

sbi can't improve performance,the only sensational news by which
it can be in headlines, and a teaser on hand instead of recovery which is more tough!

Simple Indian

7 months ago

Most PSUs regardless of the sector / industry they operate in are / have been loss-making for a long time, kept afloat by the benevolent govt with taxpayers money. The days of Nehruvian democratic socialism is long over, and the world has moved on to free market economy decades ago. China had about the same GDP as India did in the early 1980s, but it sensed the way the world was moving, and invested heavily in infrastructure development and manufacturing industries, making it the global manufacturing hub after a few years. China's GDP is now about 10 times that of India's.
I always believed that Congress party was chiefly responsible for scuttling India's economic progress with its leaders like Nehru, Indira, and Rajiv having followed flawed and outdated economic policies, which stunted rather than boosted economic growth in India. The PSUs are the legacy of Nehru's democratic socialism of the 1950s-60s. While it may have had limited purpose and need in those times, PSUs should have transformed themselves into competitive entities comparable to the private sector counterparts. Instead, they remained entrenched in socialistic ideals, and ended up with strong employees' unions, which refused to let changes in management of these PSUs. SBI is a behemoth which can easily merge many other PSUs (affiliates, to begin with) with itself even if it has to absorb their liabilities in the short-term. It would be a good move in the long-term for PSU Banks' competitiveness, but the Unions of these PSU Banks is so strong that they will never allow such mergers, which may render many of the union leaders and staff jobless, or get retrenched over time, with adoption of more technology for delivering services - like private sector Banks do. While there seems to be a hint of political will for radical economic reforms by PM Modi, he lacks political mandate, esp. in RS, to push through legislation which can ensure the morass in our economic setup, particularly the rot in the Banking system is flushed out. India is a country of freeloaders (as is known during elections) and it will be impossible for political parties to take on strong employee unions in PSU Banks, which can adversely impact the political climate in the country.

Nataraj S K

7 months ago

There was no point in starting a new Bank-- The bharatiya Mahila Bank,,which is now proposed to be merged with it's parent,the SBI. Another political decision that has apparently gone wrong,and has not worked.The needed corrective measures have to be effected,without doubt.

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