Mumbai: Punjab National Bank (PNB) swung to a net profit in the third-quarter of this fiscal, helped by lower provisioning for bad loans, after three consecutive quarters of losses.

Profit at the second-largest state-run bank rose 7.2% to 246.5 crore in the three months ended 31 December, from 230 crore a year earlier, according to a regulatory filing.

The bank recorded the turnaround despite providing fully for all its commitments, said PNB’s chief executive officer (CEO) Sunil Mehta. The recovery comes after the 14,000 crore scam involving Nirav Modi that surfaced in February last year weighed on the bank’s financials.

“We have honoured all our commitments. Our bank, as on date, has provided all for that incident. We suffered because of the one-off incident, which has now been absorbed by the bank," Mehta said at a news conference.

PNB managed to survive the storm with a liberal dose of capital infusion from the government. In the last two financial years, the bank received 13,720 crore as equity infusion from the government.

The bank provided for 2,565.7 crore towards its bad loans in the December quarter, compared with 2,996.4 crore in the same period a year earlier. It had reported a provisioning of 7,733 crore in the September quarter during which it had reported a net loss of 4,532 crore.

(Photo: Sarvesh Kumar Sharma/Mint)

Gross non-performing assets (NPAs) as a share of advances improved to 16.3% in the December quarter, from 17.16% in the September quarter. It was 12.1% in the year-before period.

Withdrawal of all loan restructuring schemes and a revised framework for resolution announced by the Reserve Bank of India in February 2018 had increased the provisioning requirement and lowered the net profits of several state-owned banks in the first half of the current fiscal year.

Thirteen state-run banks reported a combined net loss of more than 21,000 crore in the first half of FY19, compared with 11 who reported a combined net loss of more than 6,800 crore a year earlier, according to official data.

The recognition of bad loans and subsequent proceedings under the bankruptcy court are showing signs of a clean up in the banking sector.

As many as 1,500 defaulters were brought to the bankruptcy courts, since India rolled out a new bankruptcy settlement ecosystem in December 2016, .

Of these, 79 cases have been approved for resolution and 302 ended in liquidation in the last two years, according to the Insolvency and Bankruptcy Board of India (IBBI) that oversees the operation of the bankruptcy framework. Simultaneously, the government infused capital in state-run banks to improve their financial health. The government, which announced capital infusion of 2.1 trillion in state-run banks in October 2017, has so far injected more than 1.2 trillion.

PNB reported a 6.7% year-on-year increase in domestic advances to 4.58 trillion in the December quarter. It has merged or relocated 65 domestic branches to rationalise operations. Domestic deposits grew 7.2% on-year to 6.3 trillion during the quarter.

“PNB is pursuing clean and responsible banking. We will not shirk in our responsibility to take anyone to task who resorts to fraudulent or unethical practices in the bank," said Mehta.

The PNB scrip, which opened trading on the Bombay Stock Exchange at 73.80, hit an intra-day high of Rs76.5 before closing 0.55% firmer at 73.55.

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