Punjab National Bank posts net loss of Rs 4,532 crore in Q2, provisions soar 300%

Punjab National Bank (PNB), the country’s second-largest public sector lender on Friday reported a net loss of Rs 4,532 crore in the September quarter of FY19, against a net profit of Rs 561 crore a year ago as provisions soared 300% on a year-on-year (y-o-y) basis to Rs 9,758 crore.

At the operating level, PNB reported a profit of Rs 2,839.5 crore, against an operating profit of Rs 6,232 crore reported a year ago. Its net interest income (NII) – difference between interest earned and interest expended – stood at Rs 3,974 crore, down 1% y-o-y, and its domestic net interest margin — a key measure of profitability — stood at 2.46%, down 44 bps from 2.9% in Q1.

PNB said for the fraud on account of letters of understanding (LOUs) and foreign letters of credit (FLCs) involving the Nirav Modi and Mehul Choksi-related accounts worth Rs 14,357 crore, the Reserve Bank of India (RBI) had given the bank a dispensation to make provisions to the tune of 25% without debiting other reserves in Q4FY18.

The remaining amount was to be provided for during the first three quarters of FY19. “Bank had made provisions amounting to Rs 9,041.88 crore up to June 30, 2018. Further, bank has made a provision of Rs 3,295.12 crore during the quarter ended September 30, 2018. The remaining provision will be made during the next quarter of the current financial year as per terms of RBI’s dispensation,” PNB said in the notes to the statement of accounts.

As for providing against mark-to-market (MTM) losses on securities, PNB charged a depreciation of Rs 725 crore for Q3 and Q4 of FY18 as well as Q1 of FY19 and spread MTM losses worth Rs 484 crore over the coming quarters. “Further, MTM losses for the quarter ended September 30, 2018, amounting to Rs 529.33 crore have been fully provided during the quarter,” the bank said.

PNB’s capital adequacy stood at 10.08%, as opposed to the regulatory minimum of 10.25%, down from 11.56% a year ago, but better than 9.62% at the end of June.

Asset quality at PNB improved in the September quarter, with its gross non-performing assets (NPAs) as a percentage of total advances falling 110 basis points (bps) sequentially to 17.16%. Its net NPAs stood at 8.9%, down 168 bps sequentially. PNB’s cash recoveries and upgradation in the March quarter stood at Rs 2,321 crore and Rs 1,418 crore, respectively.

PNB’s global net advances stood at Rs 4.3 lakh crore at the end of the September quarter, up 5% y-o-y, and its total domestic deposits stood at Rs 6.22 lakh crore, up 7.5% y-o-y. Its share of current account and savings account (CASA) deposits stood at Rs 2.68 lakh crore or 43.02% of its total domestic deposits.

PNB shares on the BSE closed at Rs 69.05 on Friday, down 7% from its previous close.