New Delhi: State-run Punjab National Bank Ltd forecast steady loan growth with managable bad debts and surplus deposits for the fiscal year to March, even as it saw a rise in bad loans during the December quarter.
Indian banks had raised expensive cash in the wake of the financial crisis in late 2008, but were saddled with unusable deposits on weak credit growth during the fiscal year. Many saw a rise in defaults by borrowers hit by the economic slowdown.
On Monday, top lender State Bank of India had forecast stable loan growth, but warned of a possible profit hit in the March quarter from surplus liquidity and rising bad loans.
“Absolutely not,” chairman K.R. Kamath said when asked if there would be a jump in bad loans. “I don’t have any concern of a disproportionate increase in non-performing assets.”
Bad loans at PNB, India’s third-largest lender, rose to 0.48% of total lending by end-December, from 0.39% a year ago, due to “non-participation of farmers”, in a government offer to part-repay their loans, Kamath said.
Restructured loans went up to 6% from 5.8% a year ago, but officials said much of this was to prevent major defaults.
On the bank’s surplus deposits, Kamath said they would be effectively utilised. “What is not required, we will shed bulk deposits and manage our liquidity.”
He said the central bank’s projection of 18% loan growth for the fiscal year could be missed, but PNB’s portfolio expansion at around 20%, would outpace the market.
Shares in PNB closed 4.5% down at Rs860, in line with the sector index, and compared with a 2.9% fall in the Mumbai market.
The shares, which the market values at over $6 billion, had climbed 14% during the December quarter, outpacing both the sector index and the broader market.
For its fiscal third quarter, PNB said its new profit was steady at Rs10.11 billion, with a 20% loan growth balancing declines in treasury income.
Net interest income rose 18.4% to Rs23.29 billion. The bank grew its loan book by a fifth during the quarter, and maintained its net-interest margins at 3.84%.