PNB net up 26% on bad loan recovery

Robust recovery in bad loans and higher interest income helped state-run Punjab National Bank record a 26 per cent increase in net profit at Rs 541.4 crore in the third quarter ended December 31, 2007, as compared with Rs 429.8 crore in the corresponding quarter last financial year.

Total income also rose by 26 per cent to Rs 4,120 crore over the earlier quarter. While announcing the result, PNB Chairman and Managing Director K C Chakrabarty also spoke about future subsidiaries.

"A decision will be taken in next 15 days whether to merge PNB Gilts with the bank or not," Chakrabarty said.

To raise capital for PNB Housing Finance, the bank plans to either induct a joint venture partner or go for an initial public offer of the company. A decision in this regard would be taken by June, Chakrabarty said.

Chakrabarty also said the bank will divest 40 per cent of its holding in UTI AMC during the initial public offer of PNB Housing Finance. PNB holds about 31 lakh shares, out of which around 12 lakh shares would be divested in the IPO.

Giving details of the result, he said the net interest margin of the bank rose to 3.66 per cent during the quarter, as against 3.49 per cent in the second quarter ended September 30, 2007.

Total business (deposits and advances) rose 16.6 per cent to Rs 2,54,156 crore as of December 31, 2007. Deposits and advances were up 17.2 per cent and 15.8 per cent respectively to Rs 1,52,622 crore and Rs 1,01,534 crore.

However, in its statement of intent to the finance ministry, the bank has set a target of achieving 18 per cent and 20 per cent growth in deposits and advances respectively in FY08. "Growth in credit is a concern, but we expect to achieve the target by March-end," a senior executive of the bank said.

The bank has recovered Rs 800 crore bad assets by way of cash as well as upgradation of bad loans. It expects to recover another Rs 800 crore in the January-March quarter. The bank aims to bring down gross and net non-performing assets to below 3 per cent and 1 per cent from 4.11 and 1.33 per cent, respectively.

Though the capital adequacy is at a healthy 14 per cent, the bank plans to raise Rs 1,000-1,500 crore through bonds by March to support asset growth and expansion plans.

The bank is also exploring opportunities in Bhutan and setting up a branch in Dubai International Financial Centre. The bank's application is in advance stages with the Office of Superintendent of the Financial Institutions, Canada for opening a wholly owned subsidiary there.

The application for setting up an off-shore banking branch in Singapore is under process as well.