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Why PNB share price rallied to multi-year high today?

Shares of state-owned Punjab National Bank (PNB) rallied more than 6% to 55 apiece on the BSE in Friday’s trading session, trading around its highest level since February 2020, after the lender on Thursday said it has received the government approval to divestment its entire stake in UTI Asset Management Company Limited as part of its non-core asset sale plan to shore up its capital base.

“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,” the PSU bank said in an exchange filing.

The bank, which holds 15.22% stake in UTI AMC, will divestment its entire stake in the mutual fund company in single or multiple tranches for realization of gain on investment. It’s current valuation stands at 1,329 crore.

PNB in a separate filing informed that the credit ratings agency ‘CARE Ratings’ vide its rating action has revised the outlook for the Bank’s AT-1, Tier II Bonds and Infrastructure Bonds from ‘Stable’ to ‘Positive’.

“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 deposit base,” said the rating agency.

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 and internal accruals due to improved profitability in FY22, although the profitability continued to remain muted. The ratings, however, remain constrained by the moderate but improving asset quality parameters, it added.

Improvement in the asset quality parameters with gross non-performing assets reducing below 8.5% or net non-performing assets below 3% on a sustained basis; improvement in the capitalisation levels with a significant cushion over the regulatory requirement; continued improvement in profitability and capitalisation while improving its asset quality parameters on a sustained basis could be positive factors that could lead to positive rating action/upgrade, said Care Ratings.

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