New Delhi: Downturn in the economy and the credit squeeze faced even by major corporate, including MNCs, is turning out to be a blessing in disguise for Punjab National Bank (PNB), whose chief K.C. Chakrabarty said that those who never wanted to deal with PSU banks are now walking in.
“Yes,” said Chakrabarty when asked if he was witnessing some flow of business from private sector competitors like ICICI Bank and HDFC Bank.
“People who have never come to me have started coming to me. My people say that they have never allowed us to enter their buildings. They earlier said that we don’t deal with public sector banks because they are inefficient, and only deal with foreign banks. They are also coming,” he said.
On growth in corporate business, Chakrabarty said: “It cannot be disclosed. It is my business secret. You see my credit growth is 30%. Corporate credit growth is strong.”
Commenting on the loss in business confidence, he said that there will be some downturn but that does not mean credit will go down.
He said that corporates will need more funds as their credit requirement will go up because they will have to keep more inventory and also business cycle may become longer.
“So, businesswise I see no problem. But yes, profit margins will be under pressure, spread will be under pressure,” he said, adding that those who have the ability to take risk in a stress situation will do better.
Pointing out at this juncture corporate who are battling slowdown need funds, he said: “Banks have to take risk to support the customers at this difficult time. The real test of a banker is to support a customer when in difficulty.”
Asked about treasury operations of PNB, he said: “Interest rates are coming down. My bond price is going up. Say something good about banks, you say only negative about banks.”
“The impact of downturn on the banking sector is not much as of now but pressure has started. Banks are still showing 30-40% growth in the profit,” he added.
“The credit in the current financial year is likely to grow by about 22% while deposits are expected to grow between 19-20%,” he said.
Commenting on rise in NPA level, Chakrabarty said: “It is still not evident. It has not started. Only for few banks it has started going up.”
The PNB chief also expressed optimism that bad assets would not increase during the year despite industry showing signs of weaknesses. “NPAs are under control as far as PNB is concerned,” he said.
Chakarbarty further said: “As compared to first half last year, it (NPAs) has come down. It will remain low till March. What will happen after that I don’t know.”
On the impact of downturn on banks, he said: “So far, there is no problem. What will happen after six months, I don’t know.”
During the financial year ended 31 March, 2008, the bank recorded a net profit growth of 33% at Rs2,049 crore against Rs1,540 crore in the previous year.
For the first six months in the current fiscal, PNB reported a net profit of Rs1,219.50 crore, a growth of 27% over the year-ago period. The bank had a net profit of Rs963.55 crore in the July-September period last fiscal.
The bank’s gross NPA declined by 220 basis points to 2.37% as of September 2008 from 4.57% a year ago. Net NPA Ratio has correspondingly declined by 144 basis points to 0.42% from 1.86% on a year-on-year basis.