Asset quality continues to be under pressure, higher provisions weigh heavy on earnings.
Punjab National Bank (PNB), India’s third-largest public sector lender, posted a net profit of Rs 505 crore in the September-ended quarter, hitting a 25-quarter low. The profit figure is 52% lower than a year ago.
Provisioning rose an annual 38% to Rs 2,029 crore in the second quarter, eating into the bank’s earnings. This includes Rs 349 crore provided under regulatory dispensation for losses incurred due to heavy fluctuations in bond yields in the second quarter. The bank has decided to distribute the total depreciation over three quarters.
The operating profit went up 0.1% to Rs 2,535 crore and net interest income grew 10% to Rs 4,016 crore in the quarter under review. The net interest margins fell marginally to 3.47% from 3.5% a year ago and 3.52% in the previous quarter. KR Kamath, chairman and managing director, PNB, said NIMs could settle around 3.25-3.3% by the end of this financial year as the balance sheet expands.
“For the last one year, the focus was to clean up the balance sheet on both sides. Growth rate should improve, going forward,” he said adding that the bank will catch up with industry growth rate of 15% in advances by the end of current financial year. “If it comes to sacrificing NIMs and getting business, we will do that. But we will try to maintain both -- the profitability as well as growth,” he said.
The bank witnessed credit growth of 6.5% and deposit growth of 1.2% in the second quarter. Asset quality worsened as gross non-performing assets (NPA) ratio rose to 5.14% from 4.66% a year ago and net NPA ratio also moved up to 3.07% from 2.69% in the same period. The bank’s restructured loan portfolio stood at Rs 37,063 crore with Rs 2,745 crore added in the second quarter.
The bank’s capital adequacy ratio came in at 11.62% which would go up to 11.77% after the government infuses capital of Rs 500 crore in the current financial year.
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