PNB fraud erodes Rs8,000 crore of bank’s market cap in 2 days
New Delhi: Stung by a massive Rs11,400 crore fraud, state-run Punjab National Bank (PNB) has lost over Rs8,000 crore of market valuation in two days—an amount equivalent to over six-times its full-year profit.
PNB on Thursday extended its fall for the second straight session and ended the day 12% lower at Rs128.35 on BSE. The stock had fallen 10% yesterday, after the lender said it had detected a Rs11,400 crore ($1.77 billion) fraud at a Mumbai branch.
Following the slump in the counter over the last two days, the market capitalisation of the company has plunged a whopping Rs8,076.59 crore to Rs31,132.41 crore. This is more than 6-times of the company’s full-year net profit of Rs1,324 crore recorded in FY 2016-17.
The quantum of fraud itself is more than 8-times the bank’s annual profit.
The state-owned bank said it had detected a $1.77 billion fraud in which billionaire jeweller Nirav Modi allegedly acquired fraudulent letters of undertaking (LoUs) from one of its branches for overseas credit from other Indian lenders. The bank has suspended 10 officers over the PNB fraud and referred the matter to CBI for investigation.
Meanwhile, shares of PNB Housing Finance settled for the day at Rs1199.00, down 4.30% on the BSE.
While PNB did not name other lenders, Union Bank of India, Allahabad Bank and Axis Bank are said to have offered credit based on LoUs issued by PNB. An LoU is a letter of comfort issued by one bank to branches of other banks, based on which foreign branches offer credit to buyers.
Consequently, shares of Union Bank of India settled down 0.95%, Allahabad Bank ended the day down 2.31% and Axis Bank was quoted down 0.17%. This could be the biggest banking fraud in India as its quantum was bigger than an estimated Rs9,000 crore scam at erstwhile Satyam Computers.
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