PNB’s Q1 Net Profit Meets Estimates; Asset Quality Worsens

Punjab National Bank Ltd.'s quarterly profit rose in line with estimates even as the state-owned lender's asset quality deteriorated.

Net profit grew 12 percent for the April-June quarter to Rs 343 crore over the year-ago period, it said in an exchange filing.

Asset quality, however, remained a concern as net bad loans widened to 8.67 percent from 7.81 in the previous quarter. Gross NPAs grew to Rs 57,721 crore against Rs 55,370 crore. Provisions set aside for non-performing assets, however, declined 47.9 percent to Rs 2,560 crore sequentially.

The lender has exposure to nine of the 12 large stressed accounts identified by the Reserve Bank of India for insolvency proceedings, Ram Sangapure, executive director at PNB, told BloombergQuint. The lender may need Rs 1,000 crore from the government to provide for the exposure, he said.

Net interest margin stood at 2.56 percent, down from 2.8 percent a year ago, Sunil Mehta, chief executive officer and managing director of the lender, said in a press conference.

The loan book grew 2.1 percent. It is expected to grow 10 percent in the ongoing financial year, said Mehta.

Fund-Raise Plan

Mehta said the lender has taken clearance to raise Rs 3,000 crore from the market, probably via a qualified institutional placement or a follow-on public offer.

Other Key Highlights

• The net interest income, or the core income of the bank, rose 4.2 percent year-on-year to Rs 3,855 crore.
• Fresh slippages stood at Rs 6,018 crore compared to Rs 7,533 crore in the same period last year.
• Deposits rose 12.9 percent over last year to over Rs 6.2 lakh crore.
• Capital adequacy ratio, expressed as a percentage of the bank's risk weighted credit exposures, fell marginally to 11.64 percent.
• The provisioning coverage ratio, a measure of funds set aside by the bank to provide for bad loans for the period, was 58.23 percent.
• Current account savings account ratio is 44 percent of the total deposits.

Farm Loans

Sangapure said the bank continues to have its largest agriculture loan exposure in Punjab and hasn't slowed down disbursements despite the state announcing a farm loan waiver. It's farm loans in Punjab grew 10 percent year-on-year, he said.

Shares of the bank gained 1.7 percent to Rs 160 apiece on the National Stock Exchange. The stock has risen over 38 percent so far this year, in line with Nifty Bank Index.