Punjab National Bank Q3 net profit up 11.1% at Rs 2.3 bn, bad loans decline

Punjab National Bank’s net profit rose 11.1 per cent to Rs 2.3 billion in the third quarter of the financial year due to higher provisioning for bad loans.

PNB had earned a net profit of Rs 2.1 billion in the year-ago quarter and Rs 5.6 billion in the quarter ended September 2017, when the growth rate stood at 2 per cent.

Provisions during the third quarter grew 56 per cent to Rs 40.1 billion against the year-ago period, dragging the profitability of the public-sector bank, which witnessed a huge jump of 52.7 per cent in its operating profit, to Rs 42.4 billion.

The increase in operating profit was mainly on account of asset sales, PNB Managing Director and Chief Executive Officer Sunil Mehta said in a press conference, adding that incremental provisioning of around Rs 11 billion affected treasury. Banks are required to keep aside a portion of expected bad loans out of their profits, termed as provisioning.

PNB’s net interest income stood at Rs 39.9 billion, up 6.9 per cent from Rs 37.3 billion in the year-ago period, but lower by 0.6 per cent against Rs 40.1 billion in the previous quarter this year.

The bank’s bad loans, in terms of the non-performing assets, declined marginally. Gross NPAs came down to 12.1 per cent from 13.3 per cent and 12.5 per cent in the previous two quarters, respectively. Net bad debt assets inched down from 8.4 per cent at the end of September to 7.5 per cent at the end of December 2017.

The bank’s fresh slippages — the amount of loans that turned from good to bad — in the third quarter decreased to Rs 112 billion from around Rs 147 billion in the year-ago period.

It witnessed a robust loan growth of 17 per cent from 4.5 per cent in the previous quarter. “Our credit growth is robust. We witnessed a 20 per cent growth in domestic credit which is better than the private sector (banks),” Mehta said.

The uptick in credit growth came mainly from retail sector loans, which rose 22.2 per cent at the end of December 2017.

Mehta said the amount that the government would infuse into PNB as part of its recapitalisation programme would be used to support growth in business rather than going for higher haircuts. “Capital will, of course, provide us an opportunity to take more haircuts but we may not like to take that. We want to use the capital for growth and not for taking haircuts and that’s what we are planning for.”

Under the recapitalisation plan, PNB will get Rs 54.7 billion as capital infusion from the Centre — second-highest share among healthier banks.

Last year, the Union government had announced a two-year Rs 2.11 trillion road map to strengthen public sector banks hit by bad debts.