The country's second largest lender Punjab National Bank is planning to hit capital markets in the fourth quarter this fiscal to raise funds to help meet growth needs and regulatory requirements.
At the moment, the bank is sufficiently capitalised with the capital adequacy ratio of 14.14 per cent at the end of March 2020, PNB Managing Director S S Mallikarjuna Rao told PTI in an interview.
"However, we will finalise the opening balance sheet of amalgamated entities in the next board meeting in July. Probably then the bank will get an actual estimate of the capital (requirement)," he said.
"We will be planning (capital raising) somewhere around end of third quarter or beginning of fourth quarter. By this time we would have declared two quarterly balance sheet of the amalgamated entities," he said.
Besides, he said, the bank has a lot of headroom available in terms of AT 1 and Tier II bonds.
PNB amalgamated Oriental Bank of Commerce and United Bank of India with itself effective April 1 this year. With the merger, the bank now has about 11,000 branches, more than 13,000 ATMs, one lakh employees and a business mix of over Rs 18 lakh crore. Total domestic business of PNB at the end of March 2020 stood Rs 11.81 lakh crore.
Rao said that both the amalgamated entities Oriental Bank of Commerce and United Bank of India have booked losses in the fourth quarter ended March 31.
The losses were mainly due to provision against bad loans, he said, without giving numbers as they have not been made public.
In the last two financial years, most of the public sector banks got major financial support from the government in terms of capital infusion thereby eliminating the need for raising capital from the markets.
For example, the government infused Rs 16,091 crore capital in PNB during 2019-20 and Rs 5,908 crore in the preceding year. As a result, the government holding in the bank post September rose to 83.19 per cent as against 75.41 per cent at the end of March 2019.
However, the government has not committed any capital in the Budget 2020-21 for the public sector banks, hoping that the lenders will raise funds from the market depending on the requirement.
In addition, Rao said, PNB is planning to raise some money by selling some of its properties including its earlier headquarter building.
"We have a lot of real estate assets because of the merger. We are planning to sell some of them. We are planning to sell a good amount of these assets by the end of the third quarter provided the market is available. We will be not selling at a discounted price," he said.
On the outlook for 2020-21, Rao said PNB will earn moderate profit in the current fiscal, aided by treasury income and core banking activities.
For the fourth quarter ended March, the bank has posted a net loss of Rs 697.20 crore. However, after a gap of two years, the Nirav Modi fraud hit bank posted profit of Rs 363.34 crore in 2019-20.
He also said that the bank has scaled down its loan growth target to 6 per cent for the current fiscal due to the COVID-19 crisis.
However, he said, the bank has a treasury advantage due to reduction in interest rates resulting in Rs 1,000 crore gain in the first quarter of 2020-21.
"We are confident that quarter-on-quarter we can book moderate profits. We do not like to have higher profit because we want to strengthen the balance sheet during 2020-21.
"We are very confident that we will be creating a better base for the bank not only for booking moderate profit in 2020-21 but also creating a robust situation for 2021-22," he said.