The Punjab National Bank has received the government’s approval from the Department of Investment and Public Asset Management (DIPAM), Ministry of Finance, Government of India to divest its entire stake in UTI Asset Management Company 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,” PNB says in a stock exchange filing.

The timeline for making the divestment is yet to be finalized, the bank said.

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.

The stock traded at its highest level since February 2020. On Thursday, shares of PNB settled at ₹50.80 apiece, up 0.89 percent on the NSE.

Punjab National Bank shares surged 8 per cent to hit a 21-month high of Rs 54.90 per share in Friday’s intraday trade after the state owned lender received the government’s nod to divest stake in UTI AMC .The bank holds 15.22 percent stake in UTI AMC worth around Rs 1,329 crore.

The bank’s net interest income grew by 30.2 percent to ₹8,271 crore in the quarter under review from ₹6,352.8 crore a year ago.

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

By the same token

UTI AMC is the investment manager to the schemes of UTI Mutual Fund. It also manages offshore funds and provides support to the Specified Undertaking of the Unit Trust of India.

PNB is one of the sponsors of India’s oldest mutual fund company. Besides PNB, State Bank of India, Life Insurance Corporation of India, Bank of Baroda and US based T Rowe Price are other sponsors.

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 being its largest shareholder, holding 73.15 percent.

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 capitalization 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.