Mumbai: State-run Punjab National Bank (PNB) is looking to sell up to 10% in its housing finance unit and list its life insurance subsidiary, managing director and chief executive officer (CEO) Sunil Mehta said.
PNB, India’s second largest lender, now holds 38.8% in PNB Housing Finance Ltd, which has a market capitalization of nearly Rs25,000 crore. The housing finance company is considered the most valuable investment ever made by the public sector bank. It reported a 93% jump in net profit to Rs184.80 crore during the June quarter of the current fiscal year.
Separately, two bankers aware of the matter said on condition of anonymity that PNB is also planning to sell a substantial stake in PNB Gilts Ltd, its primary dealership.
PNB is trying to monetize its investments as part of a plan to achieve higher capital adequacy and improve efficiency.
Mehta said PNB plans to raise at least Rs1,000 crore by selling some of its stake in PNB Housing Finance before the end of the fiscal year. This is part of the Rs3,000 crore capital the bank plans to raise this fiscal. PNB’s capital adequacy ratio at the end of June quarter was 11.64%, above the Basel III requirements 11.5% by March 2019. Speaking at an analyst meeting after the bank’s first quarter earnings earlier this month, Mehta had said the bank remains adequately capitalised and is building up capital for any future merger and acquisition. He also stated that the bank has not asked for any additional capital from the government this year.
Pointing to the success of the PNB Housing Finance model, Mehta said the bank will look at replicating the model in other subsidiaries as well. As a first step, the bank is looking to improve the profitability of its UK subsidiary PNB International before roping in an investor. PNB International made a profit of $7 million for the first time at the end of the June quarter, Mehta said. The bank is eyeing a profit of $30 million by the end of this fiscal before it looks to sell 20% in the subsidiary. The bank has hired consulting firm Deloitte UK to help turn around the subsidiary’s operations.
Mehta also said PNB has received in-principle approval to launch an initial public offer for its life insurance subsidiary PNB MetLife. Though the timing hasn’t been finalized, the bank is looking to sell some of its 30% stake along with other investors like MetLife which holds a 26% stake, he added. The change in plans comes after MetLife abandoned its plans to exit the joint venture. The firm is yet to start the valuation process, Mehta added.
PNB has also drawn up plans to revive its investment banking unit PNB Investment Services Ltd (PNB ISL). As a first step, the bank is looking to appoint a new CEO who will draw a market-linked salary and will have complete freedom in choosing his new team.
“PNB ISL will work along with the special loan syndication cell within the bank to meet the incremental fund requirements of existing good customers of weak banks who are currently under the prompt corrective action. We want to be in the space left by weak public sector banks and which is taken over by private sector banks," said Mehta.
Plans are also being worked out to set up a special subsidiary for credit cards. Currently, PNB has issued more than 2 lakh credit cards at the end of June quarter.