PNB News Portal

PNB looking for afresh start into insurance business

2010-07-20T23:59:00.000-07:00

Punjab National Bank (PNB) is looking for a fresh start into insurance business. A board-level committee has been set up for the same.

In a communication with The Hindu Mohan V. Tanksale, Executive Director, said, a decision in this regard was taken at the last meeting of the board.

The panel will look into all possibilities for its entry into the insurance field. The scope of banks entry into insurance can be either as a corporate agent or work as a multi-product distributor or be a product manufacturer. The panel has been asked to give recommendation on the right business model for the bank’s foray into the insurance segment.

Mr. Tanksale told that the panel will be giving its recommendations in three months.

Several large Indian banks as well as foreign banks have entered the Indian life insurance space, but PNB remained out of this segment. Earlier PNB had planned to enter insurance segment in a multi-way joint venture with Vijaya Bank, Principal and Berger Paints but an exclusivity clause forced it to restrain from pursuing any kind of insurance activity, either underwriting or distribution. Mr. Tanksale told, the problem has been solved.

He told PNB is expecting to achieve a 40% growth in fee-based income during the current financial year. During 2009-10 bank fee-based income amounted at Rs 3,565 crore around 11-12 per cent of the bank’s total income. Mr. Tanksale said PNB has been interested in increasing fee-based income this year to 15 per cent.

The Executive Director has a target of achieving a 20-22 per cent credit growth this year. He disclosed that bank in general is being selective and cautious in lending to commercial real estate business. He relates this to the high risk weight assigned to commercial real estate loans. He informed bank is doing well in auto (cars, in particular), retail home and education segments in terms of credit disbursal. Bank auto loan portfolio is worth around Rs. 3,000 crore, the home segment Rs. 8,000 crore and education Rs. 2,000 crore.

Mr. Tanksale said the credit offtake in case of infrastructure projects is a bit slow. But he quickly said, the sanctions for this are happening. He said, in this case there is a usual delay in time between sanctions and loan availing. In the farm sector the debt closure as already taken place and as the monsoon is normal, thus he expects increase in agriculture credit pick up.

Mr. Tanksale argues that fixing a base rate will not make some borrowers to pay more. He said switch to base rate will force banks to focus on managing the cost of operations.

PNB issue security alerts about phishing attempts

2010-01-18T03:53:00.000-08:00

Customers of Punjab National Bank received security alerts from the bank. The bank has alerted its customer to be alert of phishing attempts. The alert stated that recently login attempts into their customers’ accounts have been tracked which were made from certain blacklisted IP addresses.

To keep check on such attempts currently bank has blocked access to accounts through internet banking. To provide more security PNB’s security team has added an extra verification process for all its net banking users.

The bank has also informed its customers that it does not send any email requesting for customer's account information or passwords. And has told its customers not to give away any such information and they should inform bank about in case they receive any such mails

Large Banks eye on Corporation, Andhra & Dena Bank for acquisition

2009-11-24T02:51:00.000-08:00

On Wednesday meeting was held between PSU banks and Finance Ministry officials to discuss the consolidation process. Corporation Bank, Andhra Bank and Dena Bank are the main targets for acquisition among the large PSU banks.

In the meeting chiefs of Punjab National Bank, Canara Bank, Union Bank of India, Bank of India and Bank of Baroda were present, they discussed the pros and cons of consolidation among banks in India.

According to anonymous sources from the banking industry, the Union Bank, Bank of Baroda and Punjab National Bank showed interest in acquiring Corporation Bank whereas Canara Bank and Punjab National were interested in Dena Bank.

On the other hand Bank of India has shown interest for acquisition of Oriental Bank of Commerce. Union Bank and PNB are also interested to acquire Andhra Bank.

Bankers said at present discussions are in preliminary stage and it can take very long time to materialize. Sources told the Finance Ministry officials will be meeting CEOs of small to medium size PSU banks to know their views on consolidation. It is believed CEOs of small-to-medium-size banks will most probably oppose their acquisition by large banks on the basis that their loyal customers will leave and also on stand alone basis the performance of banks is better.

Surprisingly, not any of the large banks have shown interest in acquiring any bank located in eastern belt like UCO Bank, Allahabad Bank or United Bank of India as they fear they might have to face resistance from the political front and other labor on this issue.

In the meeting one of the suggestions was put forward that all the three Kolkata based banks should be merged into one. However not any of the large banks were keen in acquiring Bank of Maharashtra, Central Bank of India, Punjab & Sind Bank. According to sources there was lack of interest in case of these banks mainly because of their union problems.

It has been five to six years the government has been having discussion on consolidation among Indian banks. But sources said this time some positive response was seen in the meeting which was not in the previous round of discussion. In this meeting large banks had shown interest on smaller banks through which they can increase their geographical reach and relatively clean balance sheets.

For instances, on Wednesday, PNB prepared a ground for banks which are located in the west including Gujarat and Maharashtra, Union Bank of India and Bank of Baroda has shown interest in southern belt, whereas Bank of India is interested in increasing its presence in the northern region and Canara Bank is also keen in increasing its presence in western India.

Earlier chiefs of Bank of India and Union Bank of India were interested in merger after which they will become strong bank in the western region as both banks major presence in Gujarat and Maharashtra. But the discussions could not materialize because of strong resistance from the Left front.

On Wednesday in the meeting with Finance Ministry banks advised them to formulate rules for M&A. One of the bank chief suggested in the meeting, “Every bank would like to acquire another bank irrespective of its size. Nobody wants to be acquired. But if there is a set rule on which banks are eligible to acquire and what would be to the terms, it would enable banks to work on consolidation.”

World Bank has given $2 billion to government to provide financial support to PSU banks in order to help them in meeting their capital requirement. Many banks have given indication of their capital requirement, to the Finance Ministry so that over the next three years they can maintain growth.

Bankers informed that before giving out the capital to the banks, government is preparing a bid for consolidation.

PNB first bank to open saving accounts for Siachen jawans

2009-09-02T05:22:00.000-07:00

Punjab National Bank (PNB) expressed their affection to the soldiers posted at Siachen glacier in Ladakh region, by opening over 300 saving bank accounts with overdraft facility for them.

R C Kaul PNB deputy general manager Jammu circle told, "Our team of the officials reached out to soldiers at Siachen Gaclier. They opened over 300 accounts under saving bank scheme at Partappur base-camp of the Glacier”.

He asserted that PNB is the first bank to make efforts to reach to soldiers posted in one of the coldest regions in the world.

PNB sign MoU with state housing department to provide loans to EWS & LIG

2009-07-07T05:00:00.000-07:00

A memorandum of understanding (MoU) has been signed between the state housing department and the Punjab National Bank (PNB) for providing loans to people economically weaker section (EWS) and lower income group (LIG).

For providing loans to the aspiring applicants the bank will be signing MoU with 22 development authorities in the state. In a press statement bank stated they have already signed agreements with development authorities in Gorakhpur, Varanasi, Meerut, Moradabad, Hapur and Allahabad.

While on Saturday PNB's circle head (Lucknow circle), BL Gupta signed an agreement with Lucknow Development Authority (LDA), which will be constructing as many as 10,000 houses in the EWS and LIG category. In a statement bank stated, "The main points which were covered in the MoU were execution of tripartite agreement with the allotee, creation of customer help desks by PNB at allotment office of LDA, expeditious and prompt sanctioning of loans to allot tee and sharing of allot tee database between two organizations".

Axis Bank, PNB and few PSU banks are good buy for long-term investors

2009-06-16T04:47:00.000-07:00

Since March 09 the benchmark Nifty index of the NSE has lifted by 78% hence the bank shares have moved up by higher margins, but not of all the banks.

After analyzing the stock market current position the Axis Bank, Punjab National Bank, Bank of Baroda and Bank of India are still in a very good position and a good buy for long-term investors in case growth and historical assessment are taken into account.

Since 2003 over a dozen times there have been crucial turn up or down in the bull market. ETIG evaluated the assessments of banks at these points as market dynamics often change with every considerable gain or fall. Banks’ growth line is also taken into consideration at these points as growth determines valuations.

For instance take the case of ICICI Bank. On five important dates from March 9, 2005 to July 26, 2007 banks stock traded at price to earnings (P/E) multiple of between 15 and 30. This was the only way when the market headed upwards. At this time the the growth in earnings ranged from 20-30%.

Now the bank stock is trading at a P/E of 23 and profits have declined by 10% in FY 2009. Therefore the interesting outcome of this is: although the stock is trading at pretty much the same valuation as it was in those “good old days” but the wave has changed now and it has been most affected due to the slowdown in the economy, which means that it is overrated at current prices.

For many other banks, although the valuations are still low, but their growth too has been affected. Applying the same standard as of ICICI Bank, it has been observed that Indian Overseas Bank (IOB) had a P/E multiple of between 7 and 9 at the five decisive points between March 9, 2005 and July 26, 2007 though its profit growth was in the range of 20-30%.

At present the bank’s P/E is 3.6, but net profit growth is just 10% in FY 2009, due to which banks growth is very slow. As compared to growth in earnings the valuations have come down. Therefore, it should not be interpreted as a cheap stock as the fall in growth demands a decline in valuation. Similar case is case with Allahabad Bank, Oriental Bank of Commerce and Karnataka Bank.

There are also some bank stocks which appear to be underestimated. From March ‘05 to July’ 07, Axis Bank did business at a P/E of 20-25 when net profit growth was 20-50 %. Currently the stock is trading at a P/E of 14, with net profit growth of 69% in FY 2009. The conclusion is that stock markets have not been giving it the best it deserves to show the faster rate of growth.

Even a few public sector banks seem to have intrinsic value. Punjab National Bank (PNB) did business at a P/E of 10-13 when its growth was 10-30 % between March 9, 2005 and July 26, 2007. At present, the stock trades at a P/E of 6.3. However, its net profit has grown by 51% in FY 2009. Estimation has come down but the growth has gone up, making it an even cheaper stock.

Bank of Baroda and Bank of India in the same way as of PNB, also appears to be persuading buys as their current estimations have not taken into account their faster pace of growth. In case it would have been the secular Bull Run the prices might have gone up even more sharply as the market discounts fundamentals much more easily.

Among other banks, Indian Bank and Corporation Bank are also good buys.

While HDFC Bank’s valuations have remained in the range of 25-30 but it has gained a historic growth of 30%-40 %. At present its P/E is at 29 and profit growth was 41% in FY 2009 which means that the stock is as attractive as it was. The important thing for investors is that due to such stability often stock becomes a market performer. Therefore, it is improbable that HDFC Bank will make break through in the market.

PNB sees scope for cutting lending and deposit rates

2009-05-13T04:14:00.000-07:00

On Tuesday Punjab National Bank chairman & MD K C Chakrabarty indicated that there is a scope for the cut in both lending and deposit rates. The rates can be reduced by 50-100 basis points. He added later in the day bank's asset and liabilities committee is going to hold a meeting for reviewing the rates. Speaking on the sidelines of a CII event in Delhi he added, "There is always scope for rate cuts."

Recently RBI in its annual monetary policy for 2009-10 release had cut both reverse repo rate and repo rate by 25 basis points to 3.25% and 4.75% respectively, with a view to increase economic growth.

Dr Chakraborty also added that in the current fiscal year more recruitment will be done and also has an aim to increase its customer base. He said, "We will recruit around 1,000 people and aim at adding one crore additional customers this year". The bank is also looking for a growth of 18-20% growth in deposits this fiscal.

PNB starts overseas operations in Hong Kong

2009-04-22T02:41:00.000-07:00

Punjab National Bank (PNB) a public sector bank Chairman and Managing Director K C Chakrabarty told that it has established its overseas operations with the opening of a new branch in Hong Kong.

He added that bank international operations have not been much affected by the current economic scenario moreover bank is introducing new products to show confidence in the Indian banking system.

Chakrabarty informed the bank has recently opened a second branch at Kowloon, Hong Kong. In addition to this bank have representative offices at Shanghai, Almaty, Dubai and Norway and a subsidiary in London.

He told the bank total business has shown growth of Rs 3,50,000 crore.

Giving details of the banks performance in Rajasthan, he told the total business in the stated has crossed Rs 13,800 crore.

PNB launched the global credit card on commercial level

2009-02-18T02:00:00.000-08:00

Punjab National Bank (PNB) is the second largest public sector has added one more credit card to its segment. Bank has launched global credit cards with a view to expand its product range. Two types of cards has been introduced in this category.

PNB Chairman K C Chakrabarty in its speech, during the commercial launch of the card said, "To start with we are launching two varieties of credit cards – Global Gold and Global Classic, which will meet the needs of its customers and will cater to the requirement of different income groups."

He said in November bank has done the soft launch of the cards but now it has launched the cards at commercial level therefore cards will be available across 1,200 branches of the bank across the country. He added in the beginning the card will be offered to existing customers of the bank.

Bank has tied-up with VISA as a payment gateway, thus the card will be accepted in over 29 million merchant establishments and a million ATMs across the worldwide. The card is photo credit card contains a host of features like free credit period of up to 50 days, no annual fee and attractive reward points.

In addition PNB also reported about the completion of 100% core banking implementation at all its 4,604 branches and extension counters. He notified that with the core banking it would be possible to meet the challenges of the financial sector and the centralization of the banking operations.

PNB announce cut in lending rate from Feb 1

2009-02-17T01:52:00.000-08:00

Punjab National Bank country's second largest public sector lender has announced a cut in benchmark lending rate by 50 basis points to 11.50 per cent effective February 1. With this cut millions of home loan and auto loan aspirants will get respite.

During the announcement of the bank’s third quarter result PNB Chairman and Managing Director K C Chakrabarty told reporters, "We have decided to cut Prime Lending Rate (PLR) by 50 basis points beginning next month."

He informed bank has taken decision to cut interest rates on home, car, education as well as personal loans by up to 50 basis points. The new cut will be applicable from February 1.

He added after the cut the fixed rate housing loan would range from 9.25 per cent to 11 per cent in accordance to tenors and amounts.

He pointed out likewise the revised floating rate housing loans would range from 9 per cent to 10.25 per cent according to tenors and amounts.

He informed that the new revised interest rates on floating housing loan rate will be applicable both for existing and new accounts.

Chakrabarty remarked deposit rates will be reduced in between 25 to 100 basis points across various maturities effective next month.

He said, as a result after this reduction, the peak retail deposit rate will be reduced from 8.50 per cent in the time bucket of one year to less than 3 years to 8 per cent for one year to less than 5 years.

PNB to launch credit cards in Jan, expect 28-29% loan growth

2009-01-16T03:56:00.000-08:00

Punjab National Bank (PNB), state-owned bank informed that it is expecting a healthy 28-29 per cent loan growth in the current financial year in the view of strong demand and spot its bad loans under 'manageable levels' in the months ahead.

PNB's Chairman and Managing Director, K C Chakrabarty told reporters "We have seen a good demand for loans and it (the credit growth) should be in the range of 28-29 per cent for the fiscal (2008-09)."

The bank is also considering of launching its credit-card business sometime in January and is believe to have signed agreements with Visa to avail the technology platform for the business, Chakrabarty informed.

As on December 19 PNB has an advance-base of 1.37 lakh-crore and a deposit-base of around 1.87 lakh-crore. Currently, its net non-performing assets (NPA) positioned at below 0.5 per cent and gross NPAs around 2.5 per cent, he added.

He said the bank is certain to maintain its NPAs under manageable levels although some slippages are expected in its risky asset portfolios in the latter half of next year.

"We do not expect any major increase in our bad loans from any specific portfolios... NPAs are not sector specific and depend upon the abilility of the customer in repaying the loan... It (NPA) is under controllable limits," Chakrabarty said.

He said on a year-on-year basis, PNB has registered a 29.5 per cent growth in deposits while its advances have grown by around 34 per cent as on December 19.

He added a healthy business growth in various segments is considered to help the bank to maintain a net interest margin of 3.4-3.5 per cent in the current fiscal.

Banks plan to further cut lending rates in December

2008-12-02T01:52:00.000-08:00

People who are looking forward to purchase a car or home there is good news for them as public sector banks will be further cutting the lending rates in these two segments. During December public sector are planning for the second round of cut in the benchmark lending rates by up to 50 basis points.

Some of the banks have already started reducing the deposit rates as more liquidity has been instilled by the Reserve Bank. Thus, according to a senior banker the scope for cutting lending rates has increased and this will spur demand.

Banks have started assessing asset liability situation in the light of the cuts in deposit rate coming into effect from next week, he said.

Another senior banker informed that in December further cut in Benchmark Prime Lending Rate (BPLR) in between 25-50 basis points by various banks is possible.

Earlier several public sector banks had reduced their BPLR by 75 basis points on the request made by the Finance Minister P Chidambaram earlier in the month.

Chidambaram had added that cut in the lending rates by the state-owned banks will also increase competitive pressure on their private sector counterparts which in turn will also announce similar cuts.

"Competition from public sector banks will force private sector banks to reduce their lending rates sooner than later. It will happen sooner than later," Chidambaram had said.

As usual Punjab National Bank, country's second largest lender has taken lead in reducing BPLR and has decided to reduce by 100 basis points to 12.5 per cent, which will automatically reduce PLR-linked loans by the same margin.

PNB spokesperson said the new BPLR will be applicable to all existing and new accounts. The authorities have taken decision to reduce rate "in response to monetary measures taken by RBI in November such as reduction of repo rate from 8 to 7.5 per cent, CRR (Cash Reserve Ratio) from 6 to 5.5 per cent and SLR (Statutory Liquidity Ratio) from 25 to 24 per cent."

Previously Punjab National Bank had cut its lending rates in the first week of November. The rates were then revised downward by 50 basis points to 13.5 per cent.

At present most of the banks have BPLR around 13 per cent.

PSU banks reducing interest rates is the result of number of steps taken by the RBI to introduced into the banking system Rs 2,70,000 crore since October and cuts in the short-term (repo) rates, signaling soft interest rate regime.

PNB launched its pilot project of branchless banking in Daringibadi

2008-11-26T02:36:00.000-08:00

The Punjab National Bank (PNB) as a pilot project launched mobile or branchless banking service at Daringibadi in tribal dominated and backward Kandhamal district. Recently the district has been in news for prolonged ethnic and religious strife.

PNB’s project aims to reach out to people in remote areas where banking services have not reached till now and bring them under the cover by opening no frills account in their name. “It is a technology based financial inclusion (FI) project and aims to cover vast number of un-banked rural people", said chairman-cum-managing director of the PSU bank, K.C. Chakrabarty.

Before the launch of the pilot project Chakrabarty told the reporters at Gopalpur, about 15 kms from here that the bank selected Kandhamal district in the state to launch its pilot project because large number of people in this tribal district are unaware of the benefits of banking. About 80,000 out of 6.50 lakh people of the district are using banking services.

"Initially the project will cover Dringibadi area, the biggest block of the state and gradually it will be extended to other parts of the district”, BP Sharma, the head of the bank, Orissa circle, said. He added that the New Delhi headquartered bank main aim is to extend the services to other backward districts of the state including Gajapati.

At Daringibadi Chakrabarty also inaugurated the bank’s new and 62nd branch in the state along with a bio-metric ATM. It is the eleventh project of PNB in Orissa, which aims to cover 30,000 villages, 15 million households and 75 million people by 2010 next under the rural financial inclusion program. He maintained till now the bank has already covered 10,886 villages and opened 5.32 lakh no frills accounts.

Earlier PNB has launched such pilot projects at Neemrana in Rajasthan, Patna and Gaya in Bihar, Sharanpur in Uttar Pradesh, Chandigarh, Ranchi in Jharkhand, Dehradun in Uttarakhand, Taran Trana in Punjab and Kullu and Mandi in Himanchal Pradesh.

For mobile banking the bio-metric cards, thermal filter and near filed communication ((NFC) mobile handsets are required to operate this unique banking service in the rural areas where such facilities of modern technology far from the reach. The chairman of the bank said, “The system is very cost effective and requires less manpower. It also helps in providing banking service at the doorstep of the people in far flung areas without opening new branches".

PNB to cut rates after cut in CRR, others yet to think

2008-11-03T01:54:00.000-08:00

After the cut in cash reserve ratio (CRR) by the Reserve Bank of India (RBI), Punjab National Bank (PNB), the country’s third-largest lender, is planning to cut down the lending rates for home, auto and education loans.

After the reduction the new auto loans will be 50 basis points cheaper, moreover lending rates on new and existing auto and home loans will also fall by the same margin. PNB Executive Director JM Garg informed at present no decision on corporate loans has been taken.

Punjab & Sind Bank is to take up the matter on revising rates tomorrow while other banks are adopting a wait-and-watch strategy.

The central bank has cut the CRR for the third time in the last two weeks and brings the combined cut to 2.5 percentage points. After this, the CRR will be 6.5 per cent.

Bankers pointed out lenders such as PNB and State Bank of India, which had raised interest rates by 100 basis points three months ago, might go for reduction now.

On the other hand private lenders like HDFC Bank and Standard Chartered Bank said they will not lower rates. An ICICI Bank source said the lender will decide only after assessing the cost of funds.

“The steep rise in cost of resources was not passed on the customers and it will be status quo now, perhaps indicating that customers may not get the benefit of any drop in the borrowing costs,” said HDFC Vice-Chairman & Managing Director Keki Mistry.

Standard Chartered Bank’s CEO for India and South Asia, Neeraj Swaroop, said: “We have been lending, and we will continue to lend. But lending will be lot easier for us with these cuts. It is too early to say if this CRR cut will lead to any cut in our lending rates.”

While Bank of Baroda Chairman and Managing Director MD Mallya said the bank will first watch the situation before deciding the course of action. His counterpart at UCO Bank, SC Goyal, said the Kolkata-headquartered bank is not planning an immediate rate cut, yet.

“We are not in a hurry as there are larger issues to be handled at this point. We are going slow on retail lending and had avoided a steep rise in rates earlier,” said Allahabad Bank Chairman & Managing Director KR Kamath.

Bank account portability will make change of bank simple

2008-09-30T04:08:00.000-07:00

It is very difficult to close and open a new account as there are many procedures required for this. Due to this customers find it painful to switch bank accounts even though they are not happy with their current bank’s service.

Think if it’s become possible for you to simply change the bank without changing your bank account number. This can become a reality if in India bank account portability process is adopted. Same is the case with the mobile number portability concept, the customer and not the bank will own the account number. In the countries like South Africa, Scandinavia and Europe people have already adopted the bank account portability.

“Along with technology it may happen. Today it may not be possible but tomorrow it will be. Within the bank today it is possible. You need to have only one ID and bank account can be taken anywhere. In fact bank account remains at one place only. You can get the service from anywhere,” says K.C. Chakrabarty, the chairman and managing director of Punjab National Bank.

This service will enable the account holders who want to move their payment relationship from one bank to another, therefore increasing customer mobility and lowering switching costs for their current accounts. This service will also help consumers who are mostly ignored after becoming a customer of the bank and fail to get benefit from privileges like lower interest rates on loans to new customers and sloppy service on phone banking. Though this service is yet to be implemented in India, banks say they have taken steps in the right direction.

Gunit Chadha, Managing director and chief executive officer of Deutsche Bank, said, “I think customers have the choice right now. You can in-operate an account and move to another account. And you can have no frills account with transaction account portability. So in effect there is already bank account portability because a customer can make a choice.” Chadha said although many banks have not put bank account portability high on their priority list.

It will still take few years for bank account portability to get implemented in India. Its not only the regulator will have to push for it but also all banks will have to equally come forward and technologically compatible for the flawless transfer of bank accounts.

PNB and Mitcon signed MoU for carbon credit finance

2008-08-28T21:49:00.001-07:00

Punjab National Bank and MITCON Consultancy Services Limited (MITCON) will be working together in the area of carbon credit financing. An agreement was signed between both the groups for co-operation in the area of carbon credit financing.

According to statement released by PNB under the MoU, the bank and MITCON will be working together for producing the business for services linked to carbon credit business.

The statement stated MITCON will be offering services related to identification of project, its registration with the Clean Development Mechanism Executive Board and recurring verifications, while PNB will be looking after banking related services.

Carbon credits or Certified Emissions Reductions are certificates which are issued by CDM Executive Board to projects in developing countries. These certificates are issued to certify that they have reduced green house gas emissions by one tonne of carbon dioxide per year.

These carbon credits are bought by developed countries to attain their targets under the Kyoto Protocol.

Dividend chasing not for the faint hearted!

2008-08-10T21:49:00.000-07:00

As the dividend season draws to a near close, for those investors who had been chasing stocks for dividend earnings, it is a time of stock taking as to whether it was a worthy strategy.. It is true that investing in high dividend paying companies is sensible since dividend paid is tax free at the hands of the investors, but what should be given greater importance is preservation of capital. If a company consistently pays high dividend, that is a reflection of its financial health and this could also indicate its future growth potential.

In earlier days, investors took a fancy for the MNC stocks because of their generous dividend payouts. But the domestic companies had caught up with them and the liberal tax treatment could be another reason for the large payouts since in many of the companies, the promoters’ shareholding is substantial.

Many investors assume that the percentage of dividend declared is per share basis and not on the basis of the face value of shares. The dividend announced is on the assumed face value of share of Rs 10. For instance when Hero Honda announced 950 per cent dividend, it was not Rs 95 per share, as it would have been if the share’s face value is Rs 10. But it is Rs 19 per share since the face value of Hero Honda’s share is Rs 2. To Hero Honda’s credit, it should be said that it made clear the dividend amount per share and face value of the share in its published results. With face value of shares ranging from Re 1 to Rs 10 and in some cases even Rs 100, it may be time for SEBI to tell all the companies emulate the example of Hero Honda.

While the tax free status of the dividend definitely makes them a big draw, that alone does not make investment sense if one takes into consideration the actual investment yield. For instance, Punjab National Bank (PNB) had paid a dividend of 130 per cent (Rs 13 per share of Rs 10 face value). At current prices, 100 shares of PNB would cost about Rs 50,000 and for 100 shares, the dividend received would be Rs 1,300, which works out to a yield of a mere 2.6 per cent. (13 divided by 500(share price) x 100). There are traditional favourites for high dividends – the PSU banks, the PSU oil companies, other public sector companies, MNCs, FMCG companies etc. The PSU companies pay high dividend because the majority shareholder happens to be the Government. But the continuous increase in crude oil prices and the un-remunerative local retail petro prices have eroded the profitability of the PSU oil giants – IOC, BPCL and HPCL and the dividend declared this year by them is just a fraction of what they used to pay. It would be wise for an investor to spread the risk while hunting for high dividend payers. Instead of investing in a few high value stocks that pay substantial dividend, it would make investment sense to opt for a basket of mid-value stocks across different segments that pay reasonable or same dividend. For example, Asian Paints (share FV Rs 10) that trades around Rs 1,240 a share, paid a dividend of Rs 17/share. Balmer Lawrie, which had an EPS of Rs 53.37, paid the same dividend but its share quotes around Rs 400 (face value Rs 10). If one invests in the latter the same amount as in Asian Paints, his dividend income is three times more. External factors also could undermine a stock’s value. Dredging Corporation of India, which was believed to be main beneficiary of the Sethusamudram ship canal project, saw its value skyrocket to Rs 1,300 + levels (year’s high). But it has been steadily on the decline and has come now to Rs 500 + levels after the project was caught in controversy. Though a good dividend play, the stock is not expected to improve till the picture becomes clear about the future of the project and it would be risky for the investors to take a bet on it.

Mr Hitesh Agrawal, Head-Research, Angel Broking, Mumbai, says that investing in high dividend yield stocks is one of the strategies adopted by a section of the market participants and “there is nothing inappropriate” in it as far as the fundamentals of the company are thoroughly researched. But in the ongoing market meltdown a large number of even high dividend paying blue chip companies had lost a significant percentage of their share value and even if these companies had paid huge dividend, it would not compensate the loss sustained by the investors. Chasing dividend paying stocks is not for the faint hearted and investors should dig into the stocks and hold on to them during their ups and downs to ride out the storm.

As Mr Agrawal says, only if the fundamentals of the company were sound, the investors should consider them for their high dividend yield.

PNB, Axis Bank raise rates

2008-07-31T23:11:00.000-07:00

A day after the Reserve Bank of India’s (RBI) monetary-tightening measures, banks on began raising interest rates, effecting the hike for the second time in a month.

Punjab National Bank (PNB), the country’s second-largest public sector lender, today announced a percentage point increase in the prime lending rate (PLR) to 14 per cent, while raising deposit rates by 75-100 basis points. The maximum deposit rate on offer will be 9.75 per cent a year.

Axis Bank, the third-largest private sector lender, however, opted for a more moderate PLR increase of 50 basis points. In a statement, the bank said its PLR will increase from 15.25 per cent to 15.75 per cent with effect from today. PNB’s rate hike will take effect from August 1.

The big boys — State Bank of India (SBI), ICICI Bank, HDFC Bank and HDFC — have, however, so far, remained silent on how they will respond. SBI’s asset-liability committee (Alco), which met within hours of RBI’s decision to raise the repo rate, or the rate at which it lends to banks, by 50 basis points and the cash reserve ratio (CRR), or the proportion of capital banks set aside, by 25 basis points, is expected to reconvene tomorrow.

Since April, the central bank has increased CRR by 150 basis points and the repo rate by 125 basis points to tighten money supply and combat inflation, which was estimated at 11.89 per cent in the first half of July.

PNB official dupes bank of Rs 2 lakh

2008-07-15T00:14:00.000-07:00

A case of fraud amounting to Rs 2 lakh has been reported in the Kurali branch of the Punjab National Bank (PNB) involving a cashier-cum-computer operator. According to the investigating officer, Ravindar Pal Singh, the accused, Baldev Singh Kurali, first defrauded the bank of Rs 1.87 lakh; but when he was caught, he duped 2 customers of Rs 1.1 lakh to clear the bank’s liability.

The head of PNB, Chandigarh Circle, lodged a complaint with the Kurali police that the bank had given Rs 8 lakh in cash to Baldev Singh to disburse payments as cashier-cum-computer operator on March 10. He disbursed Rs 6,12,700 but failed to deposit back the remaining amount of Rs 1,87,300.

The bank authorities initiated an enquiry against the accused and he agreed to pay back the defrauded cash.

However, on March 15, he siphoned off Rs 1,00,500 from the account of customer Balveer Singh. He also duped another customer, Beant Singh, of Rs 10,000 as he withdrew Rs 15,000 from Beant’s account when the latter came to withdraw Rs 5,000.

PNB hits 52-week low after hike in lending, deposit rates

2008-06-30T03:40:00.000-07:00

Punjab National Bank dropped 1.80% to Rs 396 at 10:16 IST on BSE after the bank said on Saturday, 28 June 2008 it has raised its benchmark prime lending rates by 50 basis to 13% per annum with effect from 1 July 2008.

The bank made this announcement on Saturday, 28 June 2008.

Meanwhile, the BSE Sensex was down 22.81 points, or 0.17%, to 13,779.41.

On BSE, 10,531 shares were traded in the counter. The scrip had an average daily volume of 1.51 lakh shares in the past one quarter.

The stock hit a 52-week low of Rs 395.20 in the counter so far during the day. The stock hit a high of Rs 406 so far during the day. The stock had a 52-week high of Rs 721 on 3 January 2008.

The mid-cap bank stock had underperformed the market over the past one month till 27 June 2008, declining 19.46% compared to the Sensex’s decline of 15.41%. It had also underperformed the market in the past one quarter, declining 23.60% compared to Sensex’s decline of 15.69%.

The bank has an equity capital of Rs 315.30 crore. Face value per share is Rs 10.

The current price of Rs 396 discounts its Q4 March 2008 annualised EPS of Rs 68.98, by a PE multiple of 5.74.

The bank has also increased interest rates by 50 basis points on housing loans, car loans and personal loans. It also decided to increase its deposit rates ranging from 25 basis points to 50 basis points in some of the time slabs.

Punjab National Bank (PNB) raised lending rates after the Reserve Bank of India (RBI) gave a strong signal that interest rates in the economy are headed north when it on Tuesday, 24 June 2008, raised repo and cash reserve ratio (CRR) by 50 basis points each on control over 11% inflation.

The double-stroke anti-inflationary measures are expected to tighten the liquidity in the system, as the CRR hike would suck out around Rs 16,000 crore. CRR is the proportion of deposits mobilised by banks and parked with the RBI for statutory requirement. Banks do not earn any interest on the cash reserves. Repo rate is the rate at which RBI lends money to banks.

PNB’s net profit rose 128.8% to Rs 543.76 crore on 19% increase in operating income to Rs 4417 crore in Q4 March 2008 over Q4 March 2007.

The state-run bank provides treasury and banking operations. The activities include accepting deposits, lending loans and to provide other financial related services.

PNB to walk out of Principal fund JV

2008-06-24T02:56:00.000-07:00

Punjab National Bank (PNB) has decided to exit Principal Asset Management Company.

"They were not performing at all, so we have decided to sever all ties with them," PNB Chairman and Managing Director K C Chakrabarty said today. Both the entities are currently negotiating the exit price.

"We are negotiating the exit price, which will be at par with the shareholding. Hopefully, it will be settled soon," Chakrabarty said. PNB Principal AMC is a joint venture between the Principal Group, PNB, Vijaya Bank and Berger Paints.

Under the JV, the Delhi-headquartered bank holds a 30 per cent stake, the Principal Group has a 26 per cent shareholding, Berger Paints 25 per cent and the remaining 19 per cent is with Vijaya Bank.

The second largest public sector bank is set to start its credit card business by October.

"We have roped in Visa as the facilitating partner. Initially, it will be available for the existing customers of the bank and in the first year, we are targeting 1-2 lakh cards," he told Business Standard during a visit to Chakla, around 60 km from Kolkata.

The visit was a part of the spot assessment of the implementation of the debt waiver scheme, announced in the Union Budget 2008-09. For the bank, the total outstanding farm loan is estimated at around Rs 18,000 crore.

PNB to start credit card business soon

2008-06-17T03:09:00.000-07:00

State-owned Punjab National Bank (PNB) is likely to launch its credit card business in the second-half of this fiscal and would enter into an agreement with Visa or Mastercard for the venture, a top bank official said.

"We expect the credit card business to get operational in a period of six months and would tie-up with Visa or Mastercard for the business. We have finalized the business strategy for the proposed card business, PNBs Executive Director," J M Garg, told reporters on the sidelines of a seminar here today.

PNB also has plans to divest around 26 per cent stake in its subsidiary, PNB Gilts, sometime this fiscal and is in talks with a few potential players, Garg said.

We are looking at a better pricing for the deal and are engaged in talks with a few players. I expect to close the deal sometime in the present fiscal when market conditions are conducive for that (the deal), he said.

On its overseas operations, Garg said that the bank plans to set up a subsidiary in Canada and a representative office in Singapore besides upgrading its existing representative office in Dubai.

PNB hikes interest rates on non-resident deposits

2008-06-04T04:08:00.001-07:00

Punjab National Bank on Tuesday announced hike in interest rate on Foreign Currency Non-Resident (B) deposit schemes for dollar, British pound and euro with effect from June 1.

The interest rate on US dollar deposits has been raised to 2.41 per cent for a maturity of one year from 2.33 per cent. For the maturity of 2-3 years, the rate is revised to 2.71 per cent against 2.43 per cent, PNB said in a release.

For tenure of 3-4 years, the interest rate has been increased to to 3.06 per cent from 2.70 per cent and on 4-5 years term deposit the new rate is at 3.30 per cent and the fixed deposit for five years it is 3.47 per cent.

On NRE Term deposits, the applicable rate of interest for June is 3.16 per cent for maturities of one year to less than two years compared to 3.08 per cent last month and 3.46 per cent for maturity in between 2-3 years, it said.

The interest rate is pegged at 3.81 per cent for the maturity of 3-5 years against 3.45 per cent earlier, it added.

PNB posts 17.31% growth in Kerala

2008-05-26T04:16:00.000-07:00

The Punjab National Bank (PNB) has registered 17.31 per cent growth in business in the Kerala Circle last fiscal. The bank did business to the tune of Rs.3,022 crore, excluding high cost deposits.

The increase in business elevated PNB to the 14th position among banks in the State. “Our aim is to improve our position further,” Krishnan Ramaiah, head, PNB Kerala Circle, said at a press conference in Kozhikode on Wednesday. PNB, the third biggest bank in the country in terms of business, had already improved its position compared to last year, he said.

To speed up growth PNB would open 12 more branches in Kerala this year, Mr. Ramaiah said. PNB’s performance shows an improvement on many counts. Its credit-deposit ratio in the State was an impressive 82.24. Last year, it was only 77.30 per cent. Deposits in the Kerala Circle at the end of March 2008 came to Rs.1,661.21 crore. It was 1,369.52 crore at the end of March 2007.

Lending to priority sector also rose to Rs.863.19 crore which is 20.66 per cent more than the previous fiscal. Volume of agricultural loans went up by as much as 44.18 per cent to Rs.179.25 crore.