 "Punjab National Bank, PNB")
Buckling under huge provisions for bad loans, Punjab National Bank (PNB) on Wednesday posted its highest-ever quarterly loss of Rs 5,367 crore for the quarter ended March 2016. The Delhi-based public sector lender had posted a net profit of Rs 306 crore in January-March 2015.
Despite the adverse quarterly performance, the PNB stock closed higher by three per cent at Rs 76 a share on the BSE on Wednesday. Siddharth Purohit of Angel Broking, who remains negative on public-sector banks, feels the management’s target to absorb a large part of bad loans in FY16 might have helped the PNB stock.
However, with the management indicating that the gross non-performing asset (NPAs) ratio would likely remain at 10 per cent in FY17, Suresh Ganapathy of Macquarie said the stock performance was totally unjustified. Agreeing with Ganapathy’s view, Shweta Daptardar of brokerage K R Choksey said the clean-up was not entirely done and return on asset (RoA) would remain depressed because of capital infusion and provisioning in FY17.
The net interest income — interest earnings minus interest expenses — fell 27 per cent to Rs 2,768 crore in January-March 2016 from Rs 3,792 crore in fourth quarter of FY15.
For FY16, the lender reported a net loss of Rs 3,974 crore, compared with a net profit of Rs 3,062 crore in FY15. The total income during the year rose to Rs 54,301 crore, against Rs 52,206 crore.
The deposits were up 10.3 per cent at Rs 5,53,051 crore in FY16. The net advances grew 8.8 per cent to Rs 4,12,326 crore. The bank expects to grow its loan book by about 10 per cent in 2016-17.
The gross NPA grew to Rs 55,818 crore (12.9 per cent) at the end of FY16 from Rs 25,684 crore in FY15. PNB’s provisions for bad loan and contingencies grew to Rs 10,485 crore in the fourth quarter of FY16 from Rs 3,834 crore a year ago. The provisions coverage ratio was 51.06 per cent as on March 31, 2016.
Usha Ananthasubramanian, PNB’s managing director and chief executive, said: “Operation clean-up for the bank is not completely over since the economy is recovering slowly.”
On Vijay Mallya’s settlement proposal of offering part payments, Ananthasubramanian said: “We want him to pay in full.” PNB has an exposure of Rs 800 crore to Mallya’s Kingfisher Airlines.
Last month, a consortium of 17 banks led by State Bank of India had rejected the proposal in the current form offered by Mallya and his companies to pay Rs 4,000 crore by September towards the settlement of his loan before the Supreme Court. Later, he revised the offer to Rs 6,868 crore to the Supreme Court which was also rejected by the banks.
Kingfisher Airlines has defaulted on loans of about Rs 9,400 crore obtained from various banks and Mallya has reportedly fled to the UK.
The bank was keeping a close watch on Special Mention Accounts II (SMA II) where dues (interest or principal) were between 61 and 90 days. The assets in this category were about Rs 11,000 crore. The standard restructured loans book consisted of loans worth Rs 20,000 crore. So, the total loans on watch list (SMA II plus restructured loans) are about Rs 31,000 crore.
On the steps to address NPA challenge, the bank is monitoring its asset book on a real-time basis. It intends to recover Rs 15,000-20,000 crore from stressed assets in current financial year, the highest target set by any public sector bank. The lender has set a minimum target of Rs 50 lakh a day per circle.
The clean-up has taken a toll on PNB’s capital adequacy. While the Common Equity Tier 1 capital remains at comfortable position, it has slipped from 8.74 per cent in March 2015 to 7.87 per cent in March 2016. The bank will liquidate non-core assets to support the capital adequacy in FY17. However, key return ratios such as RoA have slipped into the negative territory (-3.18 per cent as on March 31, 2016), and this will make equity-raising a challenge for PNB. Overall, its capital adequacy ratio rose to 13.15 per cent from 12.89 per cent. Ananthasubramanian said the bank is diversifying its loan portfolio towards low-risk sectors and borrowers requiring lower risk weighted assets. Plus, the emphasis is now on better quality collaterals while taking fresh exposure to ensure capital conservation.
The lender would try to sell its non-core assets to ensure the release of capital. The bank, however, did not give the details of the assets and timeline for sale.
