Modi govt may merge these three PSBs to create giant PSU lender

The government is weighing the possibility of the next phase of consolidation in the public sector banking space by amalgamating three lenders —Punjab National Bank (PNB), Oriental Bank of Commerce (OBC) and Punjab & Sind Bank (P&SB), sources told FE.

“An inter-ministerial group (called Alternative Mechanism) under Union minister Arun Jaitley will take a final call on this plan. The (merger) option is on the table but whether the government is going to bite the bullet ahead of polls and announce amalgamation or choose to wait is yet to be seen,” said one of the sources.

While the headquarters of PNB and Punjab & Sind Bank are in Delhi that of OBC is in Gurugram (Haryana).,

The amalgamation, if approved, will be a part of the government’s efforts to create a few but strong banks with much larger balance sheets to support the rising appetite for credit of the fast-growing economy and enable optimum utilisation of resources. Upon amalgamation, the merged entity will have a combined business of over Rs16.5 lakh crore, deposits of Rs9.6 lakh crore and advances of close to Rs7 lakh crore, said the sources.

It will pip Bank of Baroda (into which Vijaya Bank and Dena Bank have recently merged) to become the second biggest public sector bank.

The net NPA ratio of PNB and OBC stood at 8.22% and 7.15%, respectively, as of December quarter, having improved from 11.24% and 10.48% at the end of March 2018.

PNB surprised analysts by recording a 7% rise in net profit in the three months through December 2018 following losses in three previous quarters. The Reserve Bank of India (RBI) last week lifted various restrictions on OBC, which had been under the prompt corrective action (PCA) framework since October 2017. Although Punjab and Sind Bank has witnessed losses in the first two quarters of this fiscal, on top of the losses in the last fiscal, it hasn’t made into the central bank’s watch list and its net non-performing asset (NPA) ratio of 5.25% is relatively decent.

The successful experience of merging State Bank of India with five of its subsidiaries and Bharatiya Mahila Bank, and the amalgamation of Bank of Baroda, Vijaya Bank and Dena Bank have given the government confidence that another round of consolidation can be handled without hiccups. However, given that PNB, OBC and Punjab & Sind Bank, while witnessing an improvement in their finances are not out of the woods yet, the government may choose to wait until their recovery takes roots, said another source.

Presenting the Interim Budget 2019-20, finance minister Piyush Goyal said: “Amalgamation of banks has also been done to reap the benefits of economies of scale, improved access to capital and to cover a larger geographical spread.”

Source - The Financial Express

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First three PSU Banks which are removed from RBI's PCA list

A Reserve Bank of India (RBI) panel has decided to remove both Bank of India , Bank of Maharashtra and Oriental Bank of Commerce from its prompt corrective action plan (PCA) for state-owned banks that had high levels of bad debt and inadequate capital, a source directly aware of the development told Reuters on Thursday.

The source, who asked not to be named as the discussions are private, said the move follows improvements in the asset quality and capital ratios of both banks.

The RBI’s board for financial supervision took the decision at its meeting on Thursday after reviewing the December quarter performance of all banks on the PCA list, the source said.

In case of Oriental Bank of Commerce, it may also be removed from the list pending the outcome of a technical clarification from the bank, the source added. the net NPA has come down to less than 6 per cent as the government has infused sufficient capital, it said. Hence, it has been decided to remove the restrictions placed on Oriental Bank of Commerce (OBC) under PCA framework, subject to certain conditions and close monitoring, the apex bank added. 

The RBI put 11 state-owned lenders on the PCA list in the past few years. As a result, it barred them from issuing fresh big-ticket loans and expanding their operations, as well as putting their financial performance under close scrutiny.

RBI Press Release:-

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Oriental Bank of Commerce(OBC) posts net profit in Q3FY19

State-owned Oriental Bank of Commerce (OBC) on Tuesday reported a net profit of Rs 145 crore for the December 2018 quarter, on improvement in asset quality and increase in business efficiency.

It had posted a net loss of Rs 1,985 crore in the corresponding quarter of the previous financial year, OBC said in a regulatory filing.

Total income rose to Rs 5,128 crore during the third quarter, compared with Rs 4,756 crore a year ago.

The lender said it has improved on its efficiency with the net interest margin consistently rising from 1.95 per cent in the December quarter of 2017-18 to 2.80 per cent in the third quarter of this year. Sequentially, it increased from 2.58 per cent in the second quarter of this fiscal.

The bank's cost-to-income ratio also improved to 49.50 per cent in the quarter, from 50.87 per cent a year ago and 50.19 per cent in the second quarter.

Also read- Q3FY19 Results of all Public & Private Sector banks in India 

Net interest income, difference between interest earned and expended, increased to Rs 1,419 crore, compared with Rs 1,018 crore a year ago and Rs 1,275 crore in the previous quarter.

Meanwhile, OBC said it would issue more than 2.61 crore new equity shares under the employee purchase scheme at a price of Rs 71.76 per share.

The bank is expected to raise up to Rs 187.52 crore in this issue that is slated to offer for subscription by employees on January 31.

Moreover, the Gurugram-based lender also reported that its asset quality has also improved with gross non-performing assets (NPAs) falling to 15.82 per cent of the total advances in the quarter, against 16.95 per cent in the year-ago period.

Net NPAs stood at 7.15 per cent as compared with 9.52 per cent.

Value-wise, gross NPAs were Rs 24,352.98 crore in the December 2018 quarter, against Rs 27,550.88 crore a year ago. Net NPAs stood at Rs 9,972.61 crore as against Rs 14,195.07 crore. Provisions for bad loans, however, increased to Rs 4,082 crore in the quarter, from Rs 2,340 crore parked aside a year ago.

The bank said it made cash recovery of Rs 543 crore in written-off bad debt in the nine months to December 2018, up from Rs 149 crore during same period of the preceding fiscal.

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One bank may come out of PCA this week, Other two in feb

Bank of India has submitted proofs of improvement in parameters.

Close on the heels of recapitalisation, Bank of India, which received the highest infusion of Rs 10,086 crore last month, has submitted details of its three key parametres—net NPA, return on assets (RoA) and capital to risk weighted assets ratio (CRAR)—to the RBI to consider its performance to take the lender out of the PCA list.

Official sources said Bank of India (BoI) has submitted proofs of improvements in its three Prompt Corrective Action triggers to the Reserve Bank and now this would be placed before the RBI’s Board for Financial Supervision (BFS) meeting, expected in a day or two. In all probability, BoI would be out of the PCA framework this week. Sources also added Bank of Maharashtra (BoM) and Oriental Bank of Commerce (OBC) are also likely to approach the RBI on PCA triggers’ improvements later this week. As things stand, they also have a fair chance of coming out of the PCA framework this fiscal, even as early as February.

Once these three banks come out of PCA, lending by them can be expected to go up by at least 20-25 per cent, said a former bank chairman.

A banking source said BoI shareholders have through the employee stock purchase scheme (ESPS) made a capital infusion of Rs 845 crore, which has been added to the capital base of the bank and that has taken care of all the gaps in its capital shortfalls after counting the recapitalisation by the finance ministry.

Many public sector banks, including Allahabad Bank, Union Bank of India, United Bank of India, Canara Bank and Punjab National Bank, have availed of ESPS to raise funds by issuing shares to their own staff. The government, in March 2017, had allowed public sector banks to offer stock options to their employees, aimed at retaining experienced hands and as a means for raising capital. Syndicate Bank had raised Rs 500 crore through ESPS by allotting 30 crore new shares to its staff. Punjab National Bank mobilised Rs 500 crore through ESPS by issuing 10 crore shares to its employees.

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Oriental Bank of Commerce(OBC) posts profit in Q2

Oriental Bank of Commerce(OBC) on Thursday reported a profit of Rs 101.74 crore for the second quarter ended September 30, despite increase in bad loans. It had reported a net loss of Rs 1,749.90 crore in the corresponding July-September quarter of 2017-18, OBC said in a BSE filing.

However, total income of the state-owned lender declined to Rs 4,967.29 crore during the quarter, as against Rs 5,511.70 crore in the same period of 2017-18.

Asset quality dented further as gross NPAs, as a percentage of gross advances, hit 17.24 per cent by the reported quarter as against 16.30 per cent as on September 30, 2017. In absolute terms, NPAs stood at Rs 25,673.31 crore against Rs 26,431.86 crore.

Net NPAs rose to 10.07 per cent (Rs 13,795.23 crore) of the net loans by end of September quarter 2018-19 from 9.44 per cent (Rs 14,128.29 crore) in the year-ago period.

However, total provisioning eased to Rs 1,073.75 crore for the quarter, down from Rs 3,146.92 crore a year ago. At the end of the reported quarter, the capital adequacy ratio of the bank stood at 10.35 per cent as compared to 10.60 per cent in the same period a year ago.

The bank further said RBI grants banks an option to spread provisioning for mark to market (MTM) losses on investments held in bonds for the June quarter 2018 equally over up to four quarters, commencing with the first quarter.

"Accordingly, during the quarter and half-year ended September 30, 2018, Rs 144.34 crore and Rs 288.68 crore ,respectively have been charged to the profit and loss account towards such MTM losses and the balance unamortised MTM loss as on September 30 is Rs 288.68 crore," it said.

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OBC narrows Q1 loss; other income, operating profit fall sharply; NPA rises

Public sector lender Oriental Bank of Commerce has narrowed its loss at Rs 393.21 crore for the June quarter compared to loss of Rs 486.20 crore reported in same period last year.

Net interest income during the quarter grew by 17 percent year-on-year to Rs 1,337.6 crore, but non-interest income plunged 41 percent to Rs 460.34 crore and operating profit slipped 28 percent to Rs 724.25 crore YoY.

Provisions and contingencies for the quarter stood at Rs 1,539.5 crore, which increased 5 percent compared to year-ago but fell 34 percent sequentially. Provision coverage ratio improved a bit to 64.59 percent from 64 percent QoQ.

Asset quality weakened further with gross non-performing assets as a percentage of gross advances rising to 17.89 percent in Q1FY19 against 17.63 percent in previous quarter and net NPA climbing to 10.63 percent versus 10.48 percent QoQ.

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Six PSBs have given mandate to IBA to Settle 11th BPS up to Scale III only

Six Public Sector Banks have given their mandate to negotiate salary of all the employees of banks. The six banks which are State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BoB), Indian Bank, Union Bank of India and Oriental Bank of Commerce have given conditional mandate to IBA to restrict negotiate up to Scale III or IV only.

Bank’s Union have shown their displeasure against the unconditional mandate of these banks. They have written to Department of Financial Services to relook the matter and lodged their protest against the bank’s management decision.

It’s difficult to say at this moment whether decision taken by banks are correct or not to settle salary only up to Scale III/IV in 11th Bipartite Settlement or not ?

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Govt. plans to make 2nd largest bank after SBI

The government is considering merging at least four state-run banks, including Bank of Baroda, IDBI Bank Ltd, Oriental Bank of Commerce and Central Bank of India, two people aware of the matter said. If the plan goes through, the merged entity will become the second-largest bank in the country after State Bank of India, with combined assets of ₹16.58 trillion.

With the merger, the government hopes to help stem the rise in bad loans in their books at a time when poor asset quality has crippled the lending ability of some of them. The merger will also allow the weak banks to sell assets, reduce overheads and shut money-losing branches.

The four banks that are being proposed to be merged are under pressure with combined losses of ₹21,646.38 crore in the year ended 31 March.

The department of financial services, under the finance ministry, is also simultaneously considering a 51% stake sale in IDBI Bank to a strategic partner, for ₹9,000-10,000 crore, the people said on condition of anonymity.

“Dilution of (government) stake in IDBI Bank could also be achieved through stake sale to private equity investors,” said one of the two people cited above. Queries emailed to IDBI Bank, Bank of Baroda, Oriental Bank of Commerce and Central Bank of India did not elicit any response.

On 21 May, IDBI Bank told the exchanges in a regulatory filling that a special resolution will be placed for further issue of capital at its board meeting of 25 May.

On the following day, IDBI Bank informed the exchanges about a scrutinizer report for an increase in the bank’s authorized capital from the existing ₹4,500 crore to ₹8,000 crore.

The increase in authorized capital could facilitate the sale of a stake of 51% or more, in the form of a preferential issue to investors.

Government officials declined to comment, saying the matter is highly market sensitive. In his 2016 budget speech, finance minister Arun Jaitley said that the government was considering reducing its stake in IDBI Bank to less than 50%.

Source- Livemint

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