Title: Relationship of Punjab National Bank with Nifty Fifty and to calculate Beta.
Author: Priyadarshani Harichandra Harijan
Introduction: Punjab National Bank (PNB), India’s first Swadeshi Bank, commenced its operations on April 12, 1895 from Lahore, with an authorized capital of 2 lac and working capital of 20,000. The Bank was established by the spirit of nationalism and was the first bank purely managed by Indians with Indian Capital.
Objective: To calculate Beta of Punjab National Bank and to see it’s Significance.
Literature Review:
1. The Impact of Acquisition of an Insurance Company on Bank’s Financial Performance: A Study on the Acquisition of Metlife India Insurance Co. Ltd. By Punjab National Bank
This paper examines the impact of acquisition of an insurance company on a bank’s financial performance in the light of the acquisition of Metlife India Insurance Co. Ltd. by Punjab National Bank (PNB). The paper aims to study (a) whether positive or negative cumulative excess returns have accrued to PNB shareholders during the acquisition announcement; (b) whether there is any improvement in the financial and operating performance of PNB because of acquiring an insurance company; and (c) what are the reasons for the improvement or deterioration in the performance of the banking and insurance firms that opt for M&A. The present study uses CAMEL model and regression analysis for analyzing the three-year average performance before and after the bancassurance for the period of study, i.e., 2008 to 2014. The results reveal that in the short run, the indifferent behavior shown by the stock market is the cause of concern for the bank. The bank should take appropriate measures to disseminate the information with respect to its acquisition of an insurance company to its investors. But in the long run, the impact of acquisition of an insurance company is felt on the bank’s financial and operating performances.
This paper investigates the long-run and short-run impact of acquisition of shares in Metlife India Insurance Co. Ltd. By Punjab National Bank specifically to find out the contribution of bancassurance towards the performance of the bank. From the estimation results, using various financial ratios based on the different parameters of CAMEL model, it is found that there is inconsistency in the long-term impact of bancassurance. However, in terms of short-term impact, it is found that there is significant impact of BANKEX and the deal of acquiring shares in Met Life Insurance Company by Punjab National Bank on the share prices of Punjab National Bank. This shows the investors’ expectation of synergy in the deal that new strategy can bring profits to the bank.
2. Performance appraisal practices in banking segment: A study on PUNJAB NATIONAL BANK
Performance assessment or evaluation measure is probably the most appropriate approach to further develop competence or expertise inside the business. A reasonable procedure performed at regular intervals aids job satisfaction and upgrades corporate efficiency. Performance evaluation gives noteworthy as well as valuable framework for determining the competencies, awareness, confidence and entire work effectiveness of personnel. The study used a questionnaire to obtain the opinions of 60 employees of Punjab National Bank on the performance evaluation practices in their respective banks. The study shows that the respondents believed that performance rating reports were trustworthy and Important for boosting Individual efficiency and there is no significant in Punjab National Bank on the criterion of performance appraisal.
A performance assessment examines an employee’s recent significant achievements and mistakes, as well as their personal qualities that make them strong candidates for advancement or more training. The study concludes that banks design their policies to place greater emphasis on staff productivity. Performance appraisals typically examine previous actions, giving bank employees the chance to consider their prior work performance. To maintain a high level of employee enthusiasm, performance appraisals are generally the main component of performance management in banks.
Data Collection:
The data for “Nifty” and Equity for “Punjab National Bank” both has been downloaded from historical data tab for the period of one year from 1st November 20222 to 31st October 2023. The data was manipulated for arriving at the Friday closing prices for Nifty and Equity. The returns of Nifty were named as ‘X’ and subsequently, the returns of Equity were named as ‘Y’. They both regressed.
Data Analysis:
PNB’s share =1.077+2.101
n= 48, R squre= 0.255, F= 16.105
The above equation shows the relationship of Punjab National Bank with Nifty. If Nifty rises by 1 unit, PNB will rise by 2.101 unit.
T-stat for b is 4.013 and the p value is 0.00021377 which is less than 0.05, so b ≠ 0, meaning Nifty impact PNB shares.
R square is 0.25, meaning 25% of PNB share is explained by Nifty meaning 75% depends upon other things like fundamentals.
F = 16.105, and p value is less than 0.05, so the model is statistically significant at 5% level.
Conclusion:
As Beta ( 2.101) is more than 1, so good for short term investment.
Reference:
1. Leepsa, N M; Singh, Ranjit ‘The Impact of Acquisition of an Insurance Company on Bank’s Financial Performance: A Study on the Acquisition of Metlife India Insurance Co. Ltd. By Punjab National Bank’ IUP Journal of Bank Management; Hyderabad Vol. 15, Iss. 3, (Aug 2016): 52-67.
2. Dhawan, Vikas, ‘Performance appraisal practices in banking segment: A study on PUNJAB NATIONAL BANK’ Prestige International Journal of Management and Research; Indore Vol. 15, Iss. ½, (2022): 203-211.