PNB Q2 net up 16% on strong credit growth

PNB Q2 net up 16% on strong credit growth

New Delhi: State-run Punjab National Bank Ltd (PNB) on Thursday said its July-September net profit jumped 16% on strong credit growth in a fast-expanding economy, but warned its current margins may not be sustainable.

India’s second-largest public sector lender posted a profit of Rs1,075 crore for July-September, compared with Rs927 crore a year ago. Total income rose 18% to Rs7,174 crore.

Net interest income grew more than 49% to Rs2,977 crore.

The bank said net interest margin -- a key measure of efficiency -- was 4.06% during the quarter. However, a top executive was cautious on the bank’s ability to maintain such levels.

“As of now, there is pressure on liquidity...there is pressure on deposits. So I will stick to my original guidance, but it may be higher," chairman K.R. Kamath told reporters.

In July, Kamath said he expects net interest margin of 3.5% for the year 2010/11.

Rising interest rates are a challenge for the banking sector as they may put the brakes on rapid loan demand growth, especially from retail borrowers.

A majority of economists expect the RBI to raise rates by a quarter of a percentage point by end-2010 and once more by end-March 2011, when the current fiscal year ends.

Strong Loan Growth

The bank’s advances during the quarter rose 28% to Rs2.1 trillion.

Kamath expects loan growth to be 25%, in sync with other public sector banks.

India’s central bank has projected a loan growth of 20% and deposit growth of 18% for FY11.

Punjab National Bank’s net non-performing asset ratio rose to 0.69% as of end-September from 0.14% a year ago, raising concerns over its asset quality.

“If you ask me if we can handle NPAs, yes. We have the earnings," Kamath said.

Last week, rival private sector HDFC Bank said its asset quality would be “far more" stable going ahead as its net NPA dropped to 0.3 percent as of September-end from 0.5 percent a year ago.

Shares of PNB, valued at over $9.5 billion, closed down 2.5% at Rs1,307 on Thursday, in a Mumbai market that declined 0.1%.