New Delhi: Punjab National Bank (PNB), India’s second largest public sector bank by assets, said on Thursday that its net profit increased by almost one-third for the three months ended 31 March from a year earlier, benefiting from loan growth and a decline in deposit costs.
The bank recorded a net profit of Rs1,135 crore in the quarter, up by 31.06% over the year-ago period. PNB’s interest and non-interest income combined for January-March was Rs6,461 crore, up 6.82%.
The interest rate it was paying on deposits in the fourth quarter of 2009-10 was 4.88%, as against 6.24% in the previous year.
For the same period, the bank’s yield on advances fell to 10.22% from 11.8% in the previous year, but the fall was slower than that of cost of deposits, boosting net profit.
Chairman and managing director K.R. Kamath said the bank was unlikely to raise lending rates in the near future as there was enough cash in the system.
Graphic: Ahmed Raza Khan/Mint
Executive director Nagesh Pydah told Mint that PNB’s operating environment was unlikely to change significantly in the first half of the current fiscal.
PNB’s net interest margin, or the difference between interest earned and interest paid, was 3.57% for 2009-10, higher by five basis points over the previous year. One basis point is one-hundredth of a percentage point.
The net interest margin was bolstered in 2009-10 by an increase in the proportion of low-cost deposits.
The proportion of low-cost current account and savings account deposits increased from the previous year’s 38.83% to 40.85% of the total in 2009-10.
Kamath said the bank will work towards boosting the net interest margin to about 3.50%.
PNB’s gross bad loans increased by 28.20% in the fourth quarter to Rs3,214 crore. Their percentage to total advances on 31 March was 1.71%, compared with 1.60% a year ago.
“Asset quality has not worsened significantly except a few stray cases,” said J. Ganeshram, banking analyst at Spark Capital Advisors India Pvt. Ltd.
PNB’s provision coverage ratio was 81.17% for 2009-10, higher than the Reserve Bank of India’s stipulation of 70%.
For the fiscal 2009-10, the bank recorded a net profit of Rs3,905 crore, higher by 26.33% over the previous year. Total income for the same period was Rs24,879 crore, an increase of 12.10%.