PNB reports Rs507-cr Q2 net profit despite higher provisioning

 Punjab National Bank (PNB), the country’s second largest state-run lender, has reported a net profit of Rs507.05 crore for fiscal second quarter ended 30 September, against a loss of Rs4,532.35 crore in the corresponding quarter of the previous fiscal.

This, however, comes amidst a weakening of the bank’s asset quality and higher provisioning requirements. Gross bad loans as percentage of PNB’s total advances rose sequentially to 16.76 per cent in the July-September 2019-20 quarter against 16.49 per cent in the April-June 2019-20 quarter
PNB seems to have received a boost from non-interest income during the quarter, which shot up 32.5 per cent to Rs2,264.7 crore. The bank’s pre-provision operating profit grew 25.4 per cent to Rs3,562 crore year-on-year.
Net interest income during the July-September quarter increased 7.3 per cent year-on-year to Rs4,263.8 crore, even as its credit growth declined by 0.7 per cent year-on-year.
Deposits in the second quarter increased 7 per cent year-on-year.
PNB has made a provision of Rs2,928.90 crore for the quarter, which was 44 per cent higher compared with the Rs2,023.31-crore provision for the April-June 2019-20 quarter but 70 per cent lower than the Rs9,757.90 crore provision made in the year-ago quarter.
Gross non-performing assets (NPAs or bad loans) as percentage of total advances rose sequentially to 16.76 per cent in the September quarter against 16.49 per cent in the April-June 2019-20 quarter. It was 17.16 per cent in the year-ago quarter.
"During the quarter, bank has availed dispensation for deferment of provision in respect of frauds amounting to Rs2,580.72 crore. Accordingly, an amount of Rs645.19 crore has been charged to profit and loss account during the quarter and Rs1,935.53 crore has been deferred to to subsequent quarter," the bank said in a statement.
Asset quality deteriorated in the September quarter, with gross NPAs as a percentage of gross advances rising 27 basis points (bps) from he previous quarter to 16.76 per cent and net NPA climbing 48 bps to 7.65 per cent from the previous quarter.
Provisions and contingencies for the quarter increased 48 percent to Rs2,928.9 crore, but was sown 70 per cent compared to the previous year quarter.