PNB slips into the red in March quarter, posts ₹4,750 crore net loss

India’s second-largest public-sector lender Punjab National Bank (PNB) slipped into the red, incurring net losses of ₹4,750 crore in the January-March quarter, after posting a net profit of ₹247 crore in the preceding quarter.

The bank posted losses of ₹13,417 crore in the year-ago period.

The lender could not garner profit in the quarter ended March as recovery from stressed assets of ₹5,000-6,000 crore were stuck in insolvency courts, PNB managing director and chief executive officer (CEO) Sunil Mehta said on Tuesday.

“A few things which we thought will happen during this quarter didn’t materialize. In two-three major accounts (Essar Steel and Bhushan Steel and Power), which have already been resolved by the National Company Law Tribunal (NCLT), were on the table, but that money could not be unlocked. Against that, we had to make 100% provisioning because of the ageing,” Mehta said. The bank expects a write-back of roughly ₹4,000 crore, he added.

“Because of some regulatory permission we could not get in time, our stake sale for PNB Housing Finance didn’t materialize. These were the expected inflows that would have given us a net profit (in January-March),” he said. There has been a delay in the recovery of stressed assets because of litigations. A slowdown in the economy affects the prospect of investment proposals for stressed assets and, thus, slows down resolution. Bad loans also restrict the bank’s ability to finance more projects.

PNB’s provisions declined 41.3% year-on-year to ₹7,611 crore in January-March. Gross non-performing assets (NPAs) in the quarter fell to 15.5% from 18.38% year-on-year, while net NPAs declined to 6.56% from 11.24%.

The lender also has an exposure of less than ₹900 crore to Jet Airways, a senior PNB official said, on the condition of anonymity. The lender’s net interest income grew 37.1% from a year-ago to ₹4,200 crore in the March quarter. Net interest margin, a key measure of profitability, rose from 1.90% in the March quarter of 2018 to 2.45%. Due to an improvement in the asset quality, led by lower provisioning, fewer NPAs and fresh slippages, PNB’s net loss narrowed to ₹9,975 crore in 2018-19, from ₹12,283 crore a year ago.

Gross NPA fell to ₹78,473 crore during 2018-19 from ₹86,620 crore a year ago. Similarly, net NPAs fell by 38% year-on-year to ₹30,038 crore in 2018-19.

The bank had incurred net losses during the fiscal year 2017-18, after it discovered fraud of more than ₹14,000 crore involving jewellers Nirav Modi and Mehul Choksi at its Brady Road branch in Mumbai in January 2018.

Thereafter, PNB had posted losses for three consecutive quarters, beginning January-March 2017-18.

“The bank has strong fundamentals. We suffered a setback last year of which 50% provisioning was made last year and 50% has been made this year. We have taken a conscious step to clean up the book and take provision coverage ratio to a reasonably high level, which gives a high degree of safety to our stakeholders,” Mehta added. Mehta said he expects PNB to be back in black soon and hopes to garner ₹1,000 crore from the sale of non-core assets during the current fiscal year. PNB will focus on the recovery of NPAs, conservation of capital, rationalization of operation, and sale of non-core assets, he said.

Mehta also said that the bank has not received any proposal for taking control of two-three small state-owned banks and has not thought about it.

Shares of PNB ended at ₹86 on the NSE, down 3.1% from its previous close.