PNB returns to black with a bang, Q1 net at Rs 1,019 cr

New Delhi (IANS) Country's second-largest lender, the Punjab National Bank, on Friday reported a surprise profit of Rs 1,018.63 crore for the quarter ended June 30 on a big drop in provisioning for NPAs, thereby returning to black once again but with asset quality deteriorating.

The PSU lender had a loss of Rs 940 crore in the corresponding quarter last year. Shares of PNB were up at 3.18 per cent, to Rs 68.15 at the close, on the BSE. 

In the last quarter of the fiscal ended March 2019, PNB had registered a net loss of Rs 4,749.64 crore.

The huge profit was possible as the lender was able to cut down on provisions and contingencies by 64.86 per cent on a yearly basis to Rs 2,023.31 crore over Rs 5,758.16 crore. The decline in provisions was 80 per cent sequentially. 

"Provisions and contingencies stood at Rs 2,023.31 crore, down 64.8 per cent against 5,758.16 crore in the year-ago period. Sequentially, the numbers dropped 79.9 per cent. In the March quarter, the figures stood at Rs 10,071.1 1 crore," MD and CEO Sunil Mehta said. 

PNB generated fresh business of Rs 80,000 crore in Q1 FY20. 

Mehta said its CASA (Curent Account Savings Account) was up by 27 bps y-o-y to 42.85 per cent in June 19 at Rs 2.78 lakh crore. Its retail credit growth was up 22 per cent to touch Rs 91,248 crore year-on-year. Housing loans grew to Rs 54,451 crore, a year-on-year growth of 29.64 per cent. 

Mehta told IANS that the bank could hope to better its profits at the year end. Asked if that could be Rs 5,000 crore as one quarter has Rs 1,000 crore already, he said: "We would hope to get so." 

He also said the bank board has approved raising Rs 5,000 crore which can be through rights issue or via QIPs. On the non-core asset sale of the PNB, he said there is no distress sale of any of these assets, be it the housing finance arm or insurance arm.

"Everything including funds raising from market depend on the market conditions. We have just taken board approvals." 

Mehta also said that there is no internal discussion on merger or consolidation in the banking space, "but given the opportunity , the bank would certainly look at it". 

On the recent budget announcement of Rs 70,000 crore recap for PSBs, he said that the PNB has not sought any capital but it is the government's prerogative. He also said that the bank would like to reduce the NPAs to 10-12 per cent by the fiscal-end.

The bank's provision coverage ratio (PCR) stood at 74.63 per cent as of June 30. However, on the flip side its asset quality deteriorated with percentage of gross non-performing assets (NPA) rising to 16.49 per cent against 15.5 per cent on a quarterly basis. Net NPA too increased to 7.17 per cent from 6.56 per cent during the same period but on yearly basis, Gross NPA declined to 16.49 per cent in June quarter from 18.26 per cent a year ago and Net NPA fell to 7.17 per cent from 10.58 per cent in June 18. 

There was a whopping rise in domestic deposits to Rs 649,210 crore in June 19 from Rs 48,645 crore a year ago. 

Net interest income (NII) declined 11.73 per cent on a yearly basis to Rs 4,141.36 crore as against Rs 4,691.86 crore in the same period last year. In terms of absolute figures, gross NPAs declined to Rs 77,267.29 crore from Rs 82,888.79 crore.

The bank reported one loan account in the power and steel sector under Borrower Fraud category to the Reserve Bank of India during the second quarter of current financial year involving an amount of Rs 3,760.62 crore outstanding as of June 30. 

The account was that of Bhushan Steel and Power. 

The account was already under NPA category since FY16 and provision amounting to Rs 1,880.44 crore was held in the account as on June 30. This is a consortium advance of 33 lenders which is near resolution stage under the NCLT. The remaining provision in the fraud account will be done by the bank as per extant RBI guidelines. 

The PNB, hit by a Rs 12,700 crore fraud by diamond merchant Nirav Modi, is trying to move on and recover the NPAs from all channels. 

Mehta said none of the insolvency cases reached resolution in Q1.

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