Punjab National Bank Tuesday reported a net loss of Rs 4,750 crore in January-March quarter (Q4 FY19) but its asset quality improved as non performing assets (NPAs) ratios fell sharply. The state-owned lenders’ net loss was much higher than analysts’ estimates as it accelerated provisions against expected loan losses. As a result, the bank’s provisioning coverage ratio (PCR) as on March 31, 2019, rose to to 74.50 per cent from 58 per cent at the end of 2017-18.
PNB showed improvement in operating profitability as it recorded higher net interest income (NII) on the back of double digit growth in domestic advances. Operating profits rose 26 per cent during the fourth quarter while NII increased 37.1 per cent. Net loss in Q4 FY19 was lower than the highest ever loss of Rs 13,417 crore in the corresponding January-March period of FY18, but higher than Rs 246.51 crore of profits recorded in Q3 FY19. The bank’s total income during March quarter of 2018-19 rose to Rs 14,725.13 crore from Rs 12,945.68 crore in year-ago period.
PNB Managing Director Sunil Mehta said the bank earned a healthy operating profit of Rs 2,861 crore during the quarter and Rs 12,995 crore for the full year indicating strong fundamentals. “We suffered a setback (Nirav Modi fraud) last year of which, 50 per cent provisioning was done last year and 50 per cent have 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 high degree of safety to our stakeholders. So, for almost all the net NPAs, 75 per cent provision has already been made against that,” he said. The net interest margin of bank improved to 2.59 per cent from 2.42 per cent during the same period
On the assets quality front, PNB witnessed improvement as the gross non-performing assets (NPAs) which were brought down to 15.50 per cent of gross advances at the end of March 2019, as against 18.38 per cent at the end of March 2018. Net NPAs or bad loans also came down to 6.56 per cent as against 11.24 per cent in the year-ago period. NPA ratios improved as recoveries picked up pace and loan write offs also increased. In absolute value, gross NPAs stood at Rs 78,472.70 crore at the end of the financial year 2018-19, lower than Rs 86,620.05 crore reported in 2017-18. Net NPAs were at Rs 30,037.66 crore as against Rs 48,684.29 crore. Provisioning against bad loans was at Rs 9,153.55 crore in Q4 FY’19, as compared to Rs 16,202.82 crore in Q4 FY’18.
“We have factored in the entire IL&FS slippages, we have made provisions for Jet Airways although the account is standard (as on March 2019),” Mehta said. With respect to accounts covered under the provisions of the Insolvency and Bankruptcy Code, the bank is holding total provision of Rs 11,940.15 crore as on March 31, 2019, (84.63 per cent of total outstanding) including additional provision of Rs 433.93 crore in said accounts made during the year ended March 31, 2019.
He said the bank will continue to focus on recovery of NPAs, conservation of capital, rationalising operation and sale of non-core assets, among others. “We expect roughly Rs 1,000 crore from non-core asset sale,” he said. The planned stake sale in PNB Housing Finance could not take place because of some regulatory permission, and the expected inflows from that transaction could not come to the balance sheet, he said.
Higher recoveries also led to reduction in NPA levels of PNB. Recovery more than doubled to Rs 20,000 crore in 2018-19 as against Rs 9,666 crore in the previous fiscal. “If all these NCLT cases which are on the table materialise then definitely this year, recovery will be much more than 2018-19,” he said. There are two major cases which are already on the table, which could bring in recovery of around Rs 5,000-6,000 crore, enabling write back of roughly Rs 4,000 crore to profits, he said.
PNB’s shares closed down 3.53 per cent at Rs 86.10 at the National Stock Exchange Tuesday. When asked about reports of PNB merging with some other state-owned banks, he said there were no such plans. “Right now, we have not thought of it, neither any proposal has come to us …” he said.