Punjab National Bank’s Profit Falls 57%, Gross NPAs Reach 13.75%
PNB Reports Rs 306 Crore Profit. Gross NPAs Rise to 13.75%
Punjab National Bank Ltd. report a profit of Rs 306 crore in the June quarter, which was 57 percent lower than the same period last year, according to the bank’s filing on the Bombay Stock Exchange. But the bank beat Bloomberg consensus estimate of Rs 42 crore loss in the April-June quarter.
In the preceding quarter, a sharp deterioration in asset quality led PNB to report a net loss of close to Rs 5,400 crore, the worst quarterly loss in the history of Indian banking.
No Respite From Bad Loans
Asset quality deteriorated further in the June quarter, on account of fresh slippages worth around Rs 7,500 crore. This was somewhat mitigated by recoveries of around Rs 6,000 crore, the bank’s Managing Director and Chief Executive Officer Usha Ananthasubramanian told BloombergQuint.
As on June 30, PNB’s total bad loans stood at Rs 56,654 crore, or 13.75 percent of total advances, compared with 12.90 percent in the previous quarter. A year ago, its total bad loans were much lower at 6.47 percent of total loans.
The relatively smaller increase in total bad loans during the quarter meant that provisions were much lower than they were in the previous quarter. PNB’s provisions in the quarter ended June stood at Rs 2,738 crore, down from nearly Rs 10,500 crore in the previous quarter.
Analysts had estimated that PNB would make provisions of Rs 2,045 crore.
Management’s Outlook for FY17
Asset quality is likely to remain a concern for PNB in the remainder of the financial year. The bank’s watch list comprises loans worth Rs 3,900 crore, Managing Director and Chief Executive Officer Usha Ananthasubramanian said.
After the Reserve Bank of India’s asset quality review, banks have placed several large loans on a watch list, indicating a high possibility that these loans would turn into non-performing assets.
What is more significant for PNB, however, is that its restructured book has loans worth nearly Rs 19,000 crore. The management expects that a third of them will slip over the next few quarters.
The bank is targeting credit growth of 11 percent for the full financial year, Ananthasubramanian said. This despite muted loan growth in the first quarter. The PNB head indicated that the lower demand for loans during the quarter was normal, as it is usually a lean quarter for government-owned banks.
Analysts are not too certain that the bank will achieve its targeted credit growth.
“That would be difficult for them. With this kind of asset quality, and the slippages that are expected, this is likely to be a very hard target to meet,” said Nitin Aggarwal, analyst at Antique Stock Broking Ltd. The brokerage has a “hold” rating on PNB.
Other Highlights
- Provision coverage ratio for PNB stood at 52.5 percent for the quarter.
- Restructured assets declined to Rs 18,909 crore versus Rs 39,969 crore in the same quarter last year.
- The bank is looking to sell bad loans to asset reconstruction companies or conduct e-auctions to reduce non performing assets.