Mumbai: Punjab National Bank (PNB) on Tuesday reported a fiscal fourth-quarter profit of Rs261.90 crore, compared with a loss of Rs5,367.14 crore a year ago as it set aside a lower amount to cover bad assets and wrote back provisions for employee pensions and gratuity.
The bank said it revalued the provisions related to pension and gratuity funds and found that it carried an excess of Rs2,026.6 crore, which it decided to write back. Without this one-off gain, the bank would have reported a net loss of Rs1,764.7 crore. A poll of 22 analysts tracked by Bloomberg had the bank’s profit pegged at Rs447.1 crore in the March quarter.
To be sure, while the bank’s write back is within the ambit of accounting standards, its external auditors have drawn attention to this note ‘without qualifying opinion”.
The other key ingredient to the rise in profit was lower provisions against loans. The bank set aside Rs5,753.3 crore in the March quarter, down 41.7% from a year ago, as its asset quality improved slightly.
Gross non-performing assets (NPAs) stood at Rs55,370.45 crore at the end of March, marginally lower when compared with three months ago and a year ago.
While the lender added fresh bad loans, or slippages, worth Rs6,896 crore in the March quarter, recoveries and upgradation of soured assets also picked up.
About one-third of the total addition of fresh bad loans in the March quarter came from the agriculture loan book as news about Uttar Pradesh’s farm loan waiver came out.
The bank’s bad loan ratio stood at 12.5% at the end of March, compared with 13.7% three months earlier. While its provision coverage ratio, too, improved to 58.7%, the net bad loans ratio stood at 7.81% at the end of March. This could potentially trigger the Prompt Corrective Action (PCA) plan of the Reserve Bank of India. or RBI, under the new framework, where the first threshold for net bad loans has been set at 6%. The regulator has already initiated PCA in the case of IDBI Bank and Uco Bank citing poor financial performance.
“PNB’s performance is not sustainable with the current pace of bad loan addition and higher provisions,” said Suresh Ganapathy, an analyst at Macquarie Securities.
The bank grew advances 2.1% from a year ago while deposits grew 12.4%. Net interest margin, which is the difference between interest earned on advances and interest paid on deposits, fell to 2.69% for the three months to March from 2.76% a year earlier.
Net interest income, or the core income a bank earns by giving loans, rose 33.1% to Rs3,683.52 crore. One key reason for this was a threefold jump in interest the lender earned from its deposits with RBI and other interbank funds. Another bright spot in its results was a 68% jump in non-interest income (fees and commissions)to Rs3,102.80 crore.
The bank’s capital adequacy ratio stood at 11.66%, compared with 11.62% at the end of December. In an interview, the management said the bank is looking to raise capital worth Rs6,000 crore to support a 20% growth in business.
Shares of PNB rose 4.55% to Rs174.55 on BSE, while the exchange’s benchmark Sensex gained 0.86% to 30,582.60 points.