Punjab National Bank shares fell as much as 7.5 per cent on Tuesday after the state-run lender's net profit plunged over 90 per cent during the December quarter. PNB's net profit of Rs 51 crore in December quarter was way lower than the average Rs 700 crore estimated by analysts.
Punjab National Bank's profitability was hit by sharp rise in provision for bad loans. Punjab National Bank's gross non-performing assets (bad loans) surged to 8.47 per cent of advances in Q3 against 6.36 per cent in Q2, prompting the lender to double provisions to Rs 3,776 crore in Q3 from Rs 1,882 crore in Q2.
"The magnitude of NPA problem and losses at operating level was unexpected... In the last nine months, there has hardly been any growth in advances," said G Chokkalingam, Equinomics Research and Advisory.
PNB joins a string of other banks that have reported higher bad loans following Reserve Bank's order asking lenders to treat some stressed borrowers as non-performing even if they have not defaulted yet. Last month, private sector lender ICICI Bank had also reported a sharp rise in bad loans.
Most banking stocks have underperformed because of the surge in their bad and restructured loans. NPAs have risen sharply in the past three years as an economic slowdown squeezed companies' profitability and their ability to service debt.
"The surgery is not over," PNB Chief Executive Usha Ananthasubramanian told a news conference in New Delhi. "The next quarter as well ... I should say the clean-up process is underway," she said of the three months to March.
Analysts say the government should provide adequate funds to recapitalise banks weighed down with bad loans in the forthcoming budget.
Rajiv Mehta of domestic brokerage IIFL said the sharp rise in bad loans is a negative surprise, but it was factored in by markets to some extent.
"Increase in gross non-performing loans is quite high... Q4 may be like this," he said.
Experts say downsides in PNB shares are capped as the stock has corrected 46 per cent over the last year as compared to a 15 per cent fall in the broader Nifty.
PNB shares closed 6.95 per cent lower at Rs 87.75 as compared to 1.21 per cent all in the broader Nifty.
Punjab National Bank's profitability was hit by sharp rise in provision for bad loans. Punjab National Bank's gross non-performing assets (bad loans) surged to 8.47 per cent of advances in Q3 against 6.36 per cent in Q2, prompting the lender to double provisions to Rs 3,776 crore in Q3 from Rs 1,882 crore in Q2.
"The magnitude of NPA problem and losses at operating level was unexpected... In the last nine months, there has hardly been any growth in advances," said G Chokkalingam, Equinomics Research and Advisory.
PNB joins a string of other banks that have reported higher bad loans following Reserve Bank's order asking lenders to treat some stressed borrowers as non-performing even if they have not defaulted yet. Last month, private sector lender ICICI Bank had also reported a sharp rise in bad loans.
Most banking stocks have underperformed because of the surge in their bad and restructured loans. NPAs have risen sharply in the past three years as an economic slowdown squeezed companies' profitability and their ability to service debt.
"The surgery is not over," PNB Chief Executive Usha Ananthasubramanian told a news conference in New Delhi. "The next quarter as well ... I should say the clean-up process is underway," she said of the three months to March.
Analysts say the government should provide adequate funds to recapitalise banks weighed down with bad loans in the forthcoming budget.
Rajiv Mehta of domestic brokerage IIFL said the sharp rise in bad loans is a negative surprise, but it was factored in by markets to some extent.
"Increase in gross non-performing loans is quite high... Q4 may be like this," he said.
Experts say downsides in PNB shares are capped as the stock has corrected 46 per cent over the last year as compared to a 15 per cent fall in the broader Nifty.
PNB shares closed 6.95 per cent lower at Rs 87.75 as compared to 1.21 per cent all in the broader Nifty.
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