PNB profit rises 28%

Punjab National Bank (PNB), the country’s second-largest public sector lender, on Thursday reported a 28.4 per cent rise in net profit to Rs 1,068 crore for the quarter ended June 2010, compared with Rs 832 crore in the corresponding period last year.

The growth was driven by a rise in interest income, while the bank managed to keep expenses under control.

On a sequential basis, however, PNB’s net profit declined 5.88 per cent from Rs 1,135.03 crore in the quarter-ended March. Till the previous quarter, the bank had seen a decline in interest expenses and managed to keep operating expenses under control.

During the latest quarter too, costs remained under control, with expenses rising 3.4 per cent. The bank gained from a marginal decline in the interest paid on deposits, which was estimated at Rs 3,092 crore in the first quarter this year, compared to Rs 3,123 crore during April-June 2009.

What affected the show was a decline in other income, largely due to the lower trading profit of Rs 121 crore during the quarter ended June, compared to Rs 358 crore a year ago. Net interest income, however, soared 45.4 per cent to Rs 2,618.57 crore.

The other bad news was a 77 per cent rise in non-tax provisions to Rs 534 crore, a large part of which was for non-performing assets (NPAs). Provisions for NPAs, net of recovery, were estimated at Rs 548.36 crore during the quarter ended June 2010, which is 3.7 times the level of Rs 147 crore seen a year ago.

ROBUST GROWTH PERFORMANCE IN QUARTER ENDED JUNE 30
	2009	2010	% change
Interest income	5,207.42	5,991.86	15.06
Other income	970.16	871.52	-10.17
Total income	6,177.58	6,863.38	11.10
Interest paid	3,345.61	3,373.29	0.83
Operating expenses	1,262.63	1,391.92	10.24
Total expenses	4,608.24	4,765.21	3.41
Operating profit	1,569.34	2,098.17	33.70
Non-tax provisions	301.79	534.13	76.99
Net profit	832.05	1,068.29	28.39
Source: BSE                                                                                              (Rs crore)

Further, loans of about Rs 1,200 crore slipped during the quarter, raising the net NPA to net advances ratio to 0.66 per cent from 0.19 per cent a year ago. “As long as my gross NPA is within 2 per cent, we have no anxiety,” PNB Chairman and Managing Director KR Kamath said. The bank's gross NPAs in the quarter were 1.82 per cent.

The good news is that the bank’s net interest margin was 3.94 per cent at the end of June, compared to 3.57 per cent at the end of March. The bank is targeting a NIM of 3.5 per cent this year.

Going forward, Kamath said the bank expected credit flow to rise by 22 per cent and deposits to go up by 20 per cent. The Reserve Bank of India has pegged growth for advances and deposits at 20 per cent and 18 per cent, respectively. He added the bank had a headroom of Rs 6,800 crore in Tier-II but there was no immediate need to dilute equity.