PNB Q2 net dips 12% on increased bad loans provision

State-owned Punjab National Bank's net profit fell by 11.5 per cent to Rs 549.36 crore for second quarter as the provision for bad loans rose, even as "green shoots" are visible on stressed assets front.
The bank had reported a net profit of Rs 621.03 crore during the July-September quarter last fiscal.
"The green shoots are being seen as stressed assets ratio now reduced to 13 per cent. From here onward, we would like to see the reduction happening gradually. Many of the numbers, whether it be the income or cost of deposits, net interest margin, GNPA, NNPA all are moving in a positive trajectory," MD and CEO Usha Ananthasubramanian told reporters.

She said the bank has been the front-runner in CASA (current account, saving account) mobilisation and continues to be stronger on that. Operating profit is the inherent strength of the bank which has been getting more and more strong.
Total earnings of the bank during July-September quarter of current fiscal rose by a marginal 3.8 per cent to Rs 14,218.27 crore as against Rs 13,701.93 crore a year earlier.
The profits of the bank were squeezed as provision for bad loans and contingencies went up by 34.6 per cent to Rs 2,533.76 crore for July-September as against Rs 1,882.08 crore year earlier. A major portion of provision were kept aside for bad loans.

Gross non-performing assets (GNPAs) moved up to 13.63 per cent of the gross advances during the quarter as against 6.36 per year ago, while net NPAs rose to 9.10 per cent compared to 3.99 per cent year ago.

Ananthasubramanian also informed that one account worth Rs 3,000 crore of ABG Cement has been on the way of upgradation with the change in management of the company, and it has encouraged the bank to revisit such other accounts.
"We worked along with the promoter where we bring about a management change that has helped us in upgrading the account. It's a labour of almost an year. Successfully the management change happened and company name is changed and brand name is changed," she added.

This kind of success has given PNB lot of encouragement to look at these opportunities where the bank can engage itself with the promoter and ensure certain turnaround, she added.
Among other key financial of the bank during the quarter, the non-interest income grew by 76 per cent year-on-year to Rs 2,388 crore. However, net interest income fell by 10.2 per cent to Rs 4,322 crore. Net interest margin of the bank stood at 2.51 per cent.
(REOPENS DCM 33)
Ananthasubramanian said the bank has been empahsising on low cost deposit growth and discouraging high cost deposits.
She said interest rate correction is happening on and off, and the bank is least dependent on high cost deposits, while rural and semi-urban are being used as medium for mobilisation of CASA deposits.

"The bank has very consciously picking up its accounts. We are looking at highly rated accounts, which will help us in capital conservation and having least stressed books. We are deleveraging credit portfolio and large corporate accounts," she added.
Among others, PNB is pursuing financial inclusion very seriously where the bottom of the pyramid is seen as a very profitable segment both for deposits and loans.
"We have been able to mobilise almost Rs 3,600 crore of deposits from the bottom of the pyramid segment and the average balance has been Rs 1,326 per account. The bank has been engaging into a lot of potential based activity," she said.

The restructured assets of the bank declined to Rs 18,094 crore as on September 2016 from Rs 38,261 crore year-ago period.
"For intensifying the efforts in NPA reduction, a war room at the headquarters has been created. E-auction drive and sale to Asset Reconstruction Companies (ARCs) are the other measures for recovery," PNB said.
The total business of the bank stood at Rs 9.68 lakh crore as on September 2016, registering a rise of 5.2 per cent from a year ago. Total deposits grew by 6.5 per cent to Rs 5.75 lakh crore while net advances were up by 3.4 per cent to Rs 3.93 lakh crore.

Shares of PNB closed 1.16 per cent down at Rs 131.60 apiece on the BSE on Friday.