PNB surges 8% to hit 21-month high on govt's nod to divest stake in UTI AMC

PNB received the government's approval to divest its entire stake in UTI Asset Management Company (AMC) as part of its non-core asset sale plan and shore up its capital base.

Shares of Punjab National Bank  surged 8 per cent to hit a 21-month high of Rs 54.90 per share in Friday’s intra-day trade after the state-owned lender received the government’s approval to divest its entire stake in UTI Asset Management Company (AMC). The stock traded at its highest level since February 2020.

Meanwhile, shares of UTI AMC rallied 7 per cent to Rs 740 apiece, as against 0.14 per cent drop in the S&P BSE Sensex to 61,188 levels at 09:57 am.

 “The Exchange is hereby informed that the Bank has received approval of DIPAM, Ministry of Finance, Government of India for divestment of Bank's entire/part stake in UTI Asset Management Company Limited in single or multiple tranches subject to compliance of SEBI Regulations/other applicable regulatory guidelines,” PNB said.

The bank holds 15.22 per cent stake in UTI AMC, which is worth around Rs 1300 crore at current valuation.

In the past one month, the stock of PNB appreciated by 27 per cent, as compared to 4.6 per cent rise in the S&P BSE Sensex.

On Thursday, November 23, PNB informed that 'CARE Ratings' has revised the outlook for the Bank's AT-1, Tier II Bonds and Infrastructure Bonds from 'Stable' to 'Positive’.

Analysts at CARE Ratings said that the reaffirmation of the ratings assigned to the debt instruments of PNB factor in the majority ownership and demonstrated expected continued support from the Government of India (GoI) being its largest shareholder, holding 73.15 per cent.

Moreover, PNB’s increased systemic importance and position in the Indian banking sector being the second largest public sector bank (PSB) in terms of business (advances and deposits) and  asset size post-amalgamation of erstwhile Oriental Bank of Commerce and erstwhile United Bank of India w.e.f. April 01, 2020.

"The ratings continue to derive strength from its strong and established franchise through its pan-India branch network, which helps it garner a low-cost and stable current account savings account (CASA) deposit base. The ratings also factor in the improvement in the bank’s advances and comfortable capitalisation levels, enhancing its ability to absorb asset quality pressures as well as support growth in the near-term, post-equity infusion through QIP in FY22 (refers to the period from April 01 to March 31) and internal accruals due to improved profitability in FY22," the ratings agency added.