PNB reports Rs1,018.6-cr Q1 profit on lower provisioning

Public sector lender Punjab National Bank (PNB), done down by loan scams and rising on-performing assets over the past year, has reported a surprise Rs1,018.6 crore profit in the first quarter of the current fiscal ended 30 June 2019.

PNB, which had reported a loss of Rs940.01 crore in the year-ago period and a loss of Rs4,749.64 crore in the previous quarter, said the strong Q1 show was driven by a sharp fall in provisions, although asset quality has deteriorated further.
Its net NPA stood at 7.17 per cent against 6.56 per cent in the previous quarter, while gross NPA rose to 16.49 per cent from 15.50 per cent in the previous quarter.
PNB said its net interest income for the quarter was down 11.7 per cent at Rs4,141.4 crore compared to the previous year amidst a slowing of loan growth to 1.55 per cent.
Provisions at the end of June quarter stood at Rs2,023 crore, falling significantly by 80 per cent compared to the previous quarter and 65 per cent compared to the previous year quarter.
Provision coverage ratio improved marginally to 74.63 per cent from 74.5 per cent in the previous quarter. But asset quality weakened further sequentially. Gross non-performing assets (NPA) as a percentage of gross advances in Q1 increased 99bps to 16.49 per cent and net NPA as a percentage of net advances rose 61 bps to 7.17 per cent compared with the March quarter.
"We expect to bring gross NPAs below 12 per cent by the end of the year and FY20 will be a year of profitability for the bank," said Sunil Mehta, MD and CEO while addressing a press conference after the earnings announcement.
He further said that the bank was not looking at distress sale of non-core assets and will go in for sale of non-core assets when market conditions are right.
"Our exposure to troubled non-banking finance companies is very low. We will provide provisions for Bhushan Steel as per regulatory requirement and the account is in an advanced stage of resolution," Mehta added.
PNB reported fresh slippages for June quarter at Rs4,711 crore, which were lower compared to Rs6,710 crore posted in the previous quarter. Hence, annualised fresh slippage ratio declined to 4.47 per cent against 5.86 per cent on sequential basis.
Other income (non-interest income) grew by 6 per cent year-on-year to Rs2,075 crore, but operating profit fell 17 per cent to Rs3,481.4 crore in quarter ended June 2019.