Higher provisioning dents PNB bottom line

Higher provisioning saw the country's second largest public sector lender Punjab National Bank's net profit falling by 17 per cent to Rs 238 crore in the fourth quarter ended March 2007 from Rs 288 crore reported a year ago.

The bank had made a provisioning of Rs 635 crore in the January-March quarter towards retirement benefit and standard assets.

The net profit rose 7 per cent to Rs 1,540 crore for the financial year 2006-07. Last financial year, provisioning was Rs 1,691 crore towards tax, non-performing assets (NPAs), standard assets, depreciation in government securities portfolio, gratuity and pension.

The bank board has announced 60 per cent final dividend, taking the total dividend for the last financial year to 100 per cent.

PNB has projected business (deposits and advances) to grow 18 per cent to Rs 2,80,000 crore in 2007-08 from Rs 2,36,456 crore in the last financial year.

Deposits and advances are expected to grow 20-22 per cent from Rs 1,39,860 crore and Rs 96,597 crore, respectively, in 2007-08. Business, deposit and advance growth were 22 per cent, 17 per cent and 29 per cent, respectively in 2006-07.

Total income of the bank rose 27 per cent to Rs 3,713 crore during the fourth quarter, while total income for the last financial year grew 16 per cent to Rs 12,580 crore.

The capital adequacy ratio (CAR) of the bank stood at 12.29 per cent; and is likely to take a hit of 0.75 percentage point when the Basel II norms are put in place by March 2008. Net interest margin rose to 4.07 per cent from 4 per cent.

The bank plans to sell shares in the current financial year by diluting the government stake to 51 per cent from 57.8 per cent. The equity sale in the domestic market is likely to fetch the bank Rs 2000-3,000 crore, sources said.

"We need to dilute government shareholding from 57.8 per cent to 51 per cent in this financial year," PNB chairman and managing director S C Gupta said while announcing the results. The bank may also raise Rs 2,000-2,500 crore through Tier II bonds sale in this financial year.

The bank needs resources to fund overseas expansion, meet Basel II risk provisioning guidelines and sustain asset growth.

Meanwhile, the board has approved mobilisation Rs 500 crore through bonds by June 30. "We are likely to raise Rs 2000-2,500 crore through Tier II bonds in 2007-08," Gupta said.

PNB shares went up 0.9 percentage point to Rs 558.85 per share at the close of Wednesday's trading from the previous close of Rs 553.7 per share on the Bombay Stock Exchange.