Pnb Surges On Insurance Plans

The shares of Punjab National Bank (PNB) zoomed to an intra-day high of Rs 55 after it announced that it was planning a foray into insurance. The stock later pared gains and ended higher by just 0.75 per cent at Rs 47.25 on profit booking.

The bank clocked a volume of 1.92 lakh shares on the Bombay Stock Exchange and 5.93 lakh shares on the National Stock Exchange. In 20 sessions between 21 May and 18 June 2002, the scrip climbed 26 per cent to Rs 46.90 from Rs 37.25.

The surge in the public sector bank stock was followed by its plans to foray into insurance. PNB has already approached Reserve Bank of India (RBI) for permission to form a joint venture with Zurich Insurance, Switzerland, Vijaya Bank and DCM Shriram Consolidated (DSCL). As DSCL is availing credit limits from PNB, RBI has advised the bank to approach it after identifying a new partner in lieu of DSCL.

 

According to analysts, the news of the insurance foray has been expected since long but the scrip is upbeat probably because the market assumes that PNB may have found some other partner to replace DSCL. The bank's relatively low valuation may also have prompted investors to go for the stock.

Earlier, the board of PNB, at a meeting held on 13 June, reviewed the performance of PNB Capital Services, and decided that all the necessary formalities for its closure should be completed in a time- bound manner.

On 29 April 2002, the shares of PNB got listed on three exchanges - the Bombay Stock Exchange (BSE), the National Stock Exchange (NSE) and the Delhi Stock Exchange (DSE).

The bank's public offer of 5.30 crore shares at Rs 31 per share was oversubscribed 4.4 times. The issue opened on 21 March and closed on 28 March. ICICI Securities, DSP Merrill Lynch, SBI Capital, and Kotak Mahindra Capital were the lead managers to the issue.

The 108-year-old PNB is among the oldest professionally managed institutions in the Indian banking industry . It has one of the largest domestic branch networks (4,262 branches as on 31 December 2001) in the country, including 3,861 branches and 401 extension counters . This vast domestic network of branches offers the bank a very low-cost deposit base.

The bank has been servicing its customers by offering a gamut of financial products in retail and corporate banking, industrial finance, agricultural finance, financing of trade and international banking.

The bank has appointed an international consulting firm, Boston Consulting Group (BCG), to help it in restructuring operations. It is implementing recommendations of BCG in organisational structuring, credit and treasury functions, realignment of branches, retail and office control functions.

PNB has widened its product portfolio by venturing into new business areas like gold dealing, insurance and credit cards. Its subsidiaries provide services relating to capital market, housing finance, asset management, government securities, etc.

PNB has posted a net profit of Rs 562.39 crore for the year ended 31 March 2002 compared with Rs 463.64 crore for the corresponding period last fiscal. Total income increased from Rs 6,641.90 crore in FY 2000-01 to Rs 7,625.59 crore for FY 2001-02.