PNB net profit up 12%

Punjab National Bank (PNB) on Tuesday reported 12.1 per cent rise in its net profit to Rs 1,205 crore for the second quarter ended September, against Rs 1,074.5 crore in the same period last year. The increase in profits was better than expected, as the country’s largest nationalised lender saw a good growth in interest income.

Net interest income improved to 16 per cent from Rs 2,977 crore in the second quarter last year, to Rs 3,453 crore in the period under review this year. Total income in July-September rose by 37.2 per cent to Rs 9,841 crore, against Rs 7,173.6 crore in the year ago period.

The profitability, however, got affected as the bank saw 28.9 per cent rise in its provisioning to Rs 1,322.7 crore, most of which came from standard assets’ provisioning mandated by the Reserve Bank of India(RBI).

“This year there has been a change in provisioning norms by the RBI. This has led to aggressive provisioning during the September quarter,” PNB Chairman and Managing Director K R Kamath said.

In May, RBI had raised provisioning requirements on certain NPAs of banks. According to the new norms, secured exposures under doubtful assets of up to one-year would attract a provision of 25 per cent, up from 20 per cent earlier. Provisioning for standard assets of PNB went up 147 per cent, to Rs 95 crore in the September quarter, while depreciation of investments accounted for Rs 161 crore.

“When we closed the year (2010-11), the G-sec rate was 8.44 per cent. But since that rates have improved and we have made additional provisions to the tune of Rs 110 crore and covered for yield up to 8.62 per cent,” Kamath said.

The bank’s net interest margin, the difference between interest income and interest pay out, declined to 3.95 per cent in the second quarter from 4.06 per cent in the corresponding period of previous year.

On the possibility of bank raising its lending rates and savings deposit rates, Kamath said PNB was waiting for the market to react in full swing.

Deposits of the state-run bank increased 25 per cent to Rs 3.41 lakh crore, while advances were up 19.3 per cent to Rs 2.49 lakh crore. Gross non-performing assets (NPAs) increased to 2.05 per cent of advances at the end of September, against 1.91 per cent in the same period last year. Net NPAs also increased from 0.69 per cent to 0.84 per cent.

The bank’s capital adequacy ratio stood at 12.23 per cent at the end of second quarter.