Expect to post profit in current fiscal, says Punjab National Bank's MD and CEO Mallikarjuna Rao2 min read . Updated: 20 Jun 2020, 08:19 PM IST
Mallikarjuna Rao expects the operating profit to take care of the provisioning in the second half of the year, even if there is some element of stress due to covid-19
Despite the rising uncertainty due to the outbreak of the coronavirus pandemic, state-owned Punjab National Bank hopes to be black in the current financial year 2020-21. According to the bank’s Managing Director and Chief Executive Officer SS Mallikarjuna Rao, the company expects to book profit every quarter this fiscal and the real impact of the covid-19 will be seen in only in the quarter-ended March.
“It will not be a high profit, but a moderate one. We will do the estimates next month. Once we finalize the opening balance sheet in few weeks, we will also reassess the business position and we will draw out strategy by next month onwards," Rao told Mint in an interview. Besides, the new structure after the amalgamation with United Bank and Oriental Bank of Commerce will be effective July 1, from which the bank will be able to take benefit in the second half of the financial year.
Rao further explained that the lender will be able to gain treasury profits during April-September because G-sec prices have been falling. “In the second (of the year), we are expecting interest rates might firm up, even though they may not go up. I am expecting repo rate to go down very aggressively. It could be around 25-30 basis points further in current fiscal it has already come to bottom at 4%," he told Mint.
“In Q1 (April-June) and Q2 (July-September), backlog of provisions (of fraud account and aging provisions) will complete.
He also expects the operating profit to take care of the provisioning in the second half of the year, even if there is some element of stress due to covid-19.
PNB on Friday reported its standalone net loss narrowed to ₹697.20 crore for March quarter 2019-20 due to substantial decrease in provisioning. The bank had posted a net loss of ₹4,749.64 crore for the same period a year ago. In the December quarter, the bank had a loss of ₹492.28 crore.
Close to a third of PNB’s borrowers have utilised moratorium while 70 per cent continued to service loan. “We have extended the moratorium to all borrowers by default, other than large corporate. 70% of them have not used it and have started paying money. 30% of the borrowers have utlilised the moratorium," he said.
While most of the small businesses are MSMEs are eager to come back to normalcy, Rao said that some of the sectors such as hospitality, tourism may get impacted and may not bounce back immediately. “Whereas, logistics industry and industries that are not very labour intensive, will bounce back soone. So we need to understand the sectoral impact, which we may be able to understand in September. Probably, we will have to reassess what we have written at the end of July-September results and see how it is going to play out," he said.
Going forward, PNB is expecting the recovery of ₹6,000-8,000 crore during October-March, which will be primarily from insolvency courts, he said,adding that it includes big accounts like Bhushan Power and Steel, that are expected to get resolved this year.
“We need to assess recoveries for other accounts. Recoveries are dampened in this period. While we are getting recoveries in standard advances, as 70% of them did not use the moratorium, we are also concentrating on NPA advances. But pick up will only take place after the third quarter," he said.