Shares in Punjab National Bank fell a huge 14 per cent in trade today, after the bank said that the detected amount of fraud would be higher. In fact, there was also huge institutional based selling in the stock as well.
PNB fraud amount rises by Rs 1,300-1400 crores
The bank on Monday announced that the quantum of fraud could now rise to Rs 1,300-1400crores.
"In continuation to our filing with the Stock Exchanges on Feb 14, 2018, we have to inform that the quantum of reported unauthorized transactions can increase by USD 204. 25 Million (approximately)," the bank said in a release to the exchanges.
This put pressure on the stock price, which plunged almost 14 per cent at Rs 96.30. This was despite the market seeing a sharp surge in trade and recovering heavy ground.
Should you be buying the stock of PNB?
Even if PNB does take the entire knock of Rs 12,000 crores odd, its capital adequacy still remains very decent.
At the moment, we must also realize that it has got large stake in subsidiaries like PNB Housing, where it could bring down the stake and make good the losses. Apart from this it also has solid subsidiaries like PNB Principal Life Insurance etc.
The bank also has a small equity capital, as compared to other government owned banks in the country. In fact, it has the smallest equity capital when compared to all the major government owned banks in the country.
Also, if it does manage to recover some money from Nirav Modi, the stock may see a sharp reversal.
What makes PNB a good stock to buy?
The stock had hit a 52-week high of Rs 230, post the government's decision to recapitalize the bank. It has now halved in value at Rs 96.70.
We believe that there remains very little risk in the stock given its huge value in subsidiaries and its status as the second largest government owned bank in the country. It is almost impossible for a new bank to create 7,000 branches like PNB. Buy the stock if you have had an appetite for risk.
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