Life Insurance Corporation (LIC), the largest investor in state-owned lenders, has pared its exposure to these banks. In fact, in the last one year, the average holding in 20 PSBs has come down to 11.9% from 12.7%. Over the last two years, LIC has reduced its stake in most of public sector banks (PSBs) with Bank of Baroda seeing the biggest reduction of nearly five percentage points (ppts) since June 2015. This was followed by United Bank of India where the insurer reduced its exposure by another 4.82 ppts.
While the bad loan ratio of Bank of Baroda increased to 11.4% in June 2017 from 4.13% in June 2015, United Bank of India saw its NPA ratio increasing from 9.6% to 17.2% during the period.The holding in Corporation Bank – the highest ownership among the PSBs -declined by 3.63 ppt to 18.9%. LIC has also reduced its ownership in Bank of India by 2 ppts and 1.9 ppts in Indian Overseas Bank during the same time frame. The holding in SBI comes off by one percentage points to 10.4%. In the last two years, the gross non-performing assets of 20 public sector banks rose over two fold to `7.3 lakh crore at the end of June 2017, data compiled from Capitaline showed. The NPA ratio – bad loans as a percentage of total advances – increased to 13% in June 2017 from 5.5% in June 2015.
A senior LIC official FE spoke to recently, however, said that this didn’t necessarily indicate that the insurer was bearish on PSBs going forward. “Reduction in our stake in PSBs was not a valuation call but just a case of profit booking as we thought they had run up quite a bit,” he said.
However, LIC has more than doubled its holding in IDBI bank. As of August 14, LIC owns 14.2% of the paid up equity. While the holding in Vijaya Bank increased to 12.9% from 7.2% in last two years, the holding has increased in OBC and Andhra Bank by more than 4 ppts.