Nirav Modi case: PNB fraud affects stocks of Union Bank, Allahabad Bank, SBI, Axis Bank
Sameer Bhardwaj February 16, 2018
The banking sector took a hit after Punjab National Bank informed the exchanges on 14th February 2018 that it detected some unauthorised and fraudulent transactions worth $1.77 billion or Rs 11400 crores. 34 of the 39 listed banks' share prices fell between February 12 and February 15. The sudden volatility in the prices eroded the market cap of these 34 stocks by over Rs 36,380 crores. Benchmark BSE Bankex lost 1.2 per cent. PNB eroded investors wealth worth Rs 8,077 crores and its stock tanked 20.6 per cent between February 12 and February 15 2018. The share price loss widened to 25 per cent till 12 pm intra-day today. The value of PNBs fraudulent transactions are nearly 50 times the bank's Q3FY18 net profit of Rs 230.11 crores.
There are four banks that have been directly affected by such unauthorised transactions as they have offered credit based on the LoUs issued by PNB. These banks are Union Bank of India, Allahabad Bank, Axis Bank and SBI. Let us look how the share prices of these stocks reacted to the developments.
Union Bank of India: The bank lost -5.8 per cent that led to Rs 633 crores of erosion in market cap between 12 February closing and 15 February closing. Till 12 pm today, the loss widened to -8.5 per cent (since 12 February closing). According to Bloomberg, the bank's exposure in PNB fraud is about Rs 1000-Rs 2000 crores. The bank suffered a net loss of Rs 1,249.85 crores in Q3FY18. Its Gross NPAs stood at 13.03 per cent in Q3FY18 compared to 11.7 per cent in Q3FY17.
Allahabad Bank: The bank's stock price lost over -9.9 per cent till 15 February 2018. Its market cap is eroded by over Rs 484 crores. Till 12 pm today (intra-day), the share price loss widened to over -11 per cent compared to 12th February closing price. According to Bloomberg, the bank's exposure in PNB fraud is around Rs 4000 crores. In Q3FY18, the bank reported a 5.4 per cent reduction in total income with net loss of Rs 1263.79 crores. Its gross NPAs jumped to 14.38 per cent in Q3FY18 compared to 12.51 per cent in Q3FY17.
Axis Bank's share price lost -3.4 per cent till 15 February 2018 and its market value fell by over Rs 4,800 crores. Till 12 pm today, the stock price loss widened to -4.4 per cent (compared to 12 February closing). According to Bloomberg, the bank's exposure in PNB fraud is around Rs 2000 crores-Rs 3000 crores. In Q3Y18, the bank's interest income grew by 5.6 per cent. However, its total income fell by 1.3 per cent due to reduction in other income. It reported a 25.3 per cent growth in net profit. Bank's gross NPAs stood at 5.3 per cent in Q3FY18 compared to 5.2 per cent in Q3FY17.
SBI: The share price tanked -3.34 per cent and its market value fell by Rs 8,329 crores between 12 February 2018 and 15 February 2018. The share price loss widened to -5.75 per cent till 12 pm intra-day today (since 12 February 2018 closing price). In Q3FY18, the bank suffered a net loss of Rs 2416 crores compared to Rs 2610 crores profit in Q3FY17. Its gross NPAs jumped from 7.23 per cent in Q3FY17 to 10.35 per cent in Q3FY18.