New Delhi: Fraud-hit Punjab National Bank (PNB) reported a loss of ₹ 940 crore in the first quarter of 2018-19 against a profit of ₹ 343 crore in the year-ago period. The bank managed to improve on its performance compared to the immediate preceding quarter as it recovered a substantial portion of its bad debts and undertook cost-cutting measures, including shutting international and domestic branches.
The bank had reported a historic loss of ₹ 13,417 crore in the fourth quarter of 2017-18 on account of provisioning for non-performing assets (NPAs) due to tighter loan classification norms by the Reserve Bank India, the PNB fraud-related payouts to other banks, as well as losses in the bond portfolio.
A ₹ 14,356 crore PNB fraud, involving jewellers Niran Modi and Mehul Choksi, came to light in February and the bank has been struggling to limit the fallout, both on its financials and on its reputation. PNB also came close to being placed under the Reserve Bank of India’s prompt corrective action framework on account of rising non-performing assets and falling capital adequacy ratio.
Gross NPAs were at 18.26% in the first quarter as against 13.66% in the year-ago period and 18.38% in the preceding quarter. Net NPAs were at 10.58% in the June quarter as against 8.67% in the year-ago quarter and 11.24% in the preceding quarter.
Provisioning for NPAs stood at ₹ 4,981 crore as against ₹ 2,559 crore in the year-ago period and ₹ 16,202 crore in the last quarter. It was partly for providing for the Nirav Modi accounts (₹ 1,863.46 crore) and partly for improving the provision coverage ratio of the bank.
Net interest margin, a key measure of profitability, improved to 2.9% from 2.56% in the year-ago period. Net interest income was up 21.7% to Rs 4,692 crore.
“The bank has been prompt in taking corrective measures. PNB has done introspection and looked at ways to ensure that systems are strengthened,” said Sunil Mehta, managing director and chief executive officer of PNB, at a press conference, adding that the bank has segregated sourcing and processing of loans besides setting up large centralized processing centres for large loan processing. It has also started a stressed assets management vertical to recover bad loans.
Going ahead, PNB’s focus will be on NPA recovery and conservation of capital, Mehta said.
During Q1, total recovery was at ₹ 8,445 crore as against ₹ 5,617 crore in the entire financial year 2017-18, Mehta said, adding the target is to recover ₹ 20,000 crore in the first half of 2018-19. In the June quarter, the bank recovered ₹ 3,200 crore through resolution of the Bhushan Steel Ltd and Electrosteel Steels Ltd insolvency cases.
Looking to preserve capital, the bank is focussing on monetizing assets from sale of non-core assets. This amounted to ₹ 167 crore in the first quarter.
PNB has also sought approval from RBI and the government for raising funds from employees through stock options.
The bank’s capital adequacy ratio as of June end was 9.62% against 11.64% in the corresponding period a year ago and 9.2% as on 31 March.
The common equity ratio also improved to 6.05% from 5.96%. If one takes into account the ₹ 2,816 crore infused by the government in July, the bank’s capital adequacy ratio has improved to 10.3%.
At 2.05pm Tuesday, PNB shares were down 4.77%, or ₹ 4.30, to 85.85 on the BSE while the benchmark index Sensex was up 0.05%, or 19.12 points, to 37,711.01.