State-owned Punjab National Bank (PNB) today posted an 11.06 per cent increase in net profit at Rs 230.11 crore for the third quarter ended December 31, 2017 on the back of decline in bad loans.
The bank had reported a net profit of Rs 207.18 crore in the corresponding period of the last fiscal.
Although the operating profit surged 53 per cent to Rs 4,245 crore, the net profit was hit by a massive increase in the provisions for depreciation on investments, which includes the lender's treasury book.
"This year our bank, as most others, we had a hit on the treasury...There was incremental provisioning requirement which we never had in the past. This quarter was a little tough on the treasury," PNB Managing Director Sunil Mehta said here.
The bank's provisions and contingencies rose 74.3 per cent on year in the quarter to Rs 4,467 crore, with provisions for depreciation on investment rising more than eight-fold to Rs 1,075 crore.
Treasury income of banks have suffered as yields on government bonds surged in the quarter by over 60 basis points because of additional borrowing announced by the Centre.
The public sector lender's total income increased by 8.02 per cent to Rs 15,257.50 crore for the quarter under review, from Rs 14,123.98 crore in the year-ago period.
Its gross non-performing assets (NPAs) or bad loans, as a percentage of total advances, reduced to 12.11 per cent from 13.70 per cent in the same quarter of the last fiscal.
Net NPAs also fell to 7.55 per cent from 9.09 per cent.
Fresh slippages in the quarter amounted to Rs 3,950 crore while cash recovery rose substantially to Rs 9,283 crore as against Rs 3,720 crore in the same period a year ago.
The bank expects to see good recoveries in the fourth quarter of the current fiscal.
The bank has about 95 accounts in the NCLT (National Company Law Tribunal) with total exposure of Rs 18,000-19,000 crore.
"The 270-day deadline (for account resolution) is in April, so we should see some movement before that. If banks work together, they could push the issue and we will be able to see good recoveries in the fourth (quarter) itself. Banks will want to show the recoveries in this year itself and not wait for next fiscal," he said.
For smaller loans, PNB has undertaken a one-time settlement scheme to clean up its books. The recoveries through this scheme have been around Rs 1,800 crore so far in 2017-18.
Further provisions for accounts involved in the bankruptcy process will be made in January-March.
The bank would need to provide an additional Rs 1,058 crore for the accounts identified by the RBI in its first and second list of large bad loans.
These additional provisions need to be made by March 31.
On the business front, Punjab National Bank showed healthy loan growth during quarter under review, with gross advances showing an increase of 17 per cent as at the end of December.
Retail lending led the way with a growth of 22.2 per cent, while loans to agriculture and allied activities rose by 15.6 per cent.
The government has been pushing public sector banks to lend more, particularly to micro, small, and medium enterprises.
As on December 31, the provision coverage ratio stood at 60.78 per cent, while the capital adequacy ratio as per Basel-III norms was 11.58 per cent.
Shares of PNB closed at Rs 161.05 per unit, down 1.6 per cent on the BSE.
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