PNB posts Rs 940-crore loss in Q1

Punjab National Bank (PNB) on Tuesday reported a net loss of Rs 940 crore in the April-June period, its second straight quarterly loss, as it struggles to rebound from a Rs 14,357-crore fraud it had announced in February, involving jewellers Nirav Modi and Mehul Choksi. The bank recovered from the record loss of Rs 13,417 crore in the March quarter when its provisioning quadrupled to cover half of the fraud losses, apart from having to set aside funds for losses in its bond portfolio. It had posted a net profit of Rs 343.40 crore in the June quarter last fiscal.

PNB shares plunged 8.1% on the BSE on Tuesday, against a marginal fall in the Sensex. Interestingly, PNB’s losses would have been starker but for two factors. First, its provisioning for half the fraud amount that was to be spread over three quarters (starting with the three months through June) was actually less than a third in the June quarter. This means the bank has to set aside more in the next two quarters for the fraud losses than what it has done now (in the June quarter, it provided for only Rs 1,863.46 crore against Rs 2,392.81 crore, which is a third of the remaining fraud losses).

Second, PNB could write back Rs 9.13 crore in its profit and loss account, thanks to a Reserve Bank of India (RBI) clarification in July on spreading banks’ losses on their bond portfolio. So while the additional provisioning for mark-to-market losses on its investments in available for sale and held for trading bond categories needed for the June quarter was `Rs 724.63 crore, PNB had set aside Rs 733.76 crore in the March quarter.

This allows the state-run lender to write back the excess amount, apart from not having to set aside funds in the last quarter. The provisioning for the remaining MTM losses of Rs 1,208.71 crore will be done in the subsequent three quarters. Provisioning touched Rs 5,758 crore in Q1, lower than Rs 20,353 crore in the previous quarter, although it was still more than a double of the amount a year earlier.

Its asset quality remained worrisome, with gross non-performing asset having hit 18.26% in the June quarter, slightly better than 18.38% in the March quarter but much worse than 13.66% a year ago. Nevertheless, at the operating level, PNB reported a profit of Rs 4,195 crore, compared with a loss of Rs 447 crore in the previous quarter and a profit of Rs Rs 3,217 crore a year earlier. Its net interest income stood at Rs 4,692 crore, up 21.7% from a year before and against a decline of 17% in the previous quarter. Its domestic net interest margin, a gauge for profitability, stood at 2.9%, against 2.51% in the March quarter and 2.56% a year earlier.

PNB managing director Sunil Mehta said Rs 5,000-7,000 crore worth of bad loans could be resolved through the insolvency proceedings in the current quarter. He said the bank expects to mop up around Rs 8,600 crore through the sale of non-core assets in this fiscal and that the bank could achieve profit in the current fiscal, tiding over initial losses.

Its capital adequacy in the June quarter improved a tad to 9.62%, against 9.2% in the previous three months, but it was still much worse than 11.64% a year earlier and lower than the regulatory minimum of 10.25%. Return on asset continued to remain in negative territory (-0.48%), although it was better than -6.72% in the last quarter.