Q2 Earnings: Fraud-Hit Punjab National Bank Reports Rs 4,543 Crore Loss On Higher Provisions

Punjab National Bank reported a loss for the third straight quarter, as it continued to put aside provisions against the Nirav Modi fraud and its large pool of bad loans.

The state-owned lender's net loss stood at Rs 4,532 crore for the three months ended September compared with a profit of Rs 560.6 core a year ago, according to its exchange filing. That's higher the Rs 1,349-crore loss estimated by analysts polled by Bloomberg.

Net interest income, or the core income, fell a little over 1 percent year-on-year to Rs 3,974 crore.

The bank's asset quality showed some improvement. The gross non-performing assets ratio slipped to 17.16 percent from 18.26 percent in the June quarter. The net NPA ratio narrowed to 8.90 percent from 10.58 percent.

Lingering Impact Of Nirav Modi Fraud

The bank's wider-than-expected loss came because of a sharp increase in provisioning.

Its total provisions stood at Rs 7,733.3 crore against Rs 4,982 crore in the preceding three months ended June and Rs 2,693.8 crore a year ago.

In its disclosures, the bank said that it had made additional provisions of Rs 3295 crore against the Nirav Modi fraud during the September ended quarter. Prior to this, the bank had provided Rs 9042 crore against the total fraud amount of Rs 14357 crore.

“The remaining provision will be made during the next quarter of the current financial year as per terms of RBI's dispensation,” said the bank.

Some provisions were also set aside on account of mark-to-market (MTM) losses on the bank's bond portfolio. The RBI had allowed lenders to spread these provisions over four quarters for MTM losses incurred during the December 2017, March 2018 and June 2018 quarters. This was done to ease the pressure on bank treasury portfolios from a sharp systemic rise in bond yields.

Operational Performance

Over the quarter, the bank saw its advances rise 5 percent compared to last year. Deposits rose 21 percent.

The bank's capital adequacy ratio stood at 10.08 percent at the end of the September quarter compared to 9.62 percent at the end of the last quarter.

Shares of the lender pared early gains and fell as much as 7 percent to close at Rs 68.90 apiece. The stock declined 58.1 percent so far this year compared to a 3 percent gain in the S&P BSE Sensex.