PNB posts net loss of Rs 492 cr in Q3; gross NPAs down at 16.3%

Punjab National Bank (PNB) slipped into losses in the third quarter of 2019-20, posting its first quarterly loss in over a year ahead of its planned merger with two other public sector banks (PSBs).

PNB’s net loss stood at Rs 492.3 crore in October-December 2019, compared to a net profit of Rs 507 crore in the previous quarter. A big jump of 73 per cent in the provisioning towards bad loans, from Rs 2,565 crore in the same quarter previous fiscal to Rs 4,445 crore, affected the profitability of the second-largest PSB.

PNB had last reported a loss in the September-ended quarter of 2018-19 when its net loss was Rs 453 crore. In the third quarter of this financial year, the bank’s net interest income (difference between interest earned through lending and interest paid to depositors) remained flat at around Rs 4,355 crore from a year-ago period.

The bank’s fresh slippages — the amount of loans that turned from good to bad —doubled to Rs 6,783 crore from Rs 3,324 in same quarter last year. Majority of the fresh slippages for the bank came from agriculture (Rs 2,100 crore) and micro, small and medium enterprises (MSME) sectors (Rs 1,400 crore). The bank had to provide for Rs 1,189 crore towards housing finance company Dewan Housing Finance Corporation.

The bank has an exposure of around Rs 1,000 crore towards Vodafone Idea which will add to the stress. The bank expects fresh NPAs to the tune of Rs 3,000 crore in the next two quarters but mostly on account of stress in the agriculture and MSME accounts.

“Cases worth Rs 8,800 crore will come up for resolution in the bankruptcy courts in the fourth quarter and we expect a recover of Rs 3,000 crore from these accounts,” PNB managing director and chief executive officer SS Mallikarjuna Rao told CNBC-TV18 on Tuesday.

The bank, however, saw a mild improvement in the asset quality. Gross NPAs came down to 16.3 per cent from 16.76 per cent in the previous quarter. Net bad debt assets inched down from 7.65 per cent at the end of September to 7.18 per cent at the end of December 2019. The Provisioning Coverage Ratio of PNB was 75.27 per cent at the end of December, meaning it has accounted for three-fourth of NPAs in its balance sheet.

Punjab National Bank, Oriental Bank of Commerce and United Bank of India will combine to form the nation’s second-largest lender beginning April 1, 2020. The bank had sufficient capital buffer three months before going in for amalgamation. Its common equity tier (CET)-1 ratio rose stood at 10.64 per cent (of risk-weighted assets) at the end of Q3, up from 6.93 per cent one year back, due to capital infusion of Rs 16,091 crore by the central government in Q2 — much above the regulatory requirements of 5.5 per cent.

PNB is yet to move into a new corporate tax regime and said that it is in the process of "evaluating the option to opt for lower tax rate."