State-owned Punjab National Bank (PNB) on Tuesday reported a profit of Rs 507.06 crore for the second quarter ended September 30 aided by substantial reduction in provisioning for bad loans.
The lender had posted a loss of Rs 4,532.35 crore in the corresponding July-September quarter last year.
During the quarter, provisions for bad loans sharply declined to Rs 3,253.32 crore against Rs 7,733.27 crore in July-September 2018. The provisions during the year-ago period included the amount for the Rs 14,000-crore fraud committed by jeweller duo Nirav Modi and Mehul Choksi.
Gross non-performing assets (NPAs) amounted to 16.76 per cent of the gross advances at the end of September, lower than 17.16 per cent a year ago.
Net NPAs or bad loans also came down to 7.65 per cent as against 8.90 per cent in the year-ago period.
Going forward, the focus on recovery will help bring down the net NPA to the comfort level of the Reserve Bank of India (RBI) by the end of the current fiscal, newly-appointed PNB managing director S S Mallikarjuna Rao said after announcing the quarterly numbers here.
"If you look at the guidance, we are very confident that we can bring down the net NPA by March 2020 below 6 per cent," he said.
Rao, who was appointed the head of the country's second largest lender last month, has set an ambitious recovery target of Rs 24,000 crore for the entire fiscal.
Of this, the bank has already done recovery of Rs 7,000 crore during the first half of the current fiscal and the remaining Rs 17,000 crore would be done in the remaining half through cash recovery and reduction, he added.
"In NCLT there are 14 cases which are in final stages. From NCLT we are expecting Rs 11,000 crore reduction from NPAs...the real amount received will be around Rs 6,500 crore, against which the write-back will be about Rs 3,800 crore," he said.
Total income during July-September quarter rose to Rs 15,556.61 crore from Rs 14,035.88 crore in the same quarter last year, PNB said in a regulatory filing.
The bank has earned a healthy operating profit of Rs 3,561 crore during the quarter as against Rs 2,839.50 crore in the same period a year ago.
During the quarter, gross NPAs in absolute term stood at Rs 78,472.70 crore at the end of September, lower than Rs 86,620.05 crore reported in the second quarter of 2018-19. Net NPAs were valued at Rs 32,658.69 crore as against Rs 38,278.84 crore.
Talking about fresh slippages, Rao said, "Our guidance is that it should be around Rs 19,000 crore for the entire year. Already Rs 5,200 crore and Rs 7,460 crore in April-June and July-September respectively. So, another Rs 7,000 crore we are expecting in the second half of the year."
When you look at Rs 7,462 crore fresh slippages, he said, major contribution is from 10 corporate accounts.
"Some of them are in public domain like Suzlon (Rs 600 crore), Jet airways (Rs 700 crore), that have contributed to these. Agriculture Rs 632 crore, retail Rs 498 crore, MSME Rs 1,506 crore. So these are the three RAM accounts and others are Rs 4,786 crore. This is the composition of Rs 7,462 crore of total slippages," he said.
During the quarter, the total interest income of the bank rose to Rs 13,292 crore from Rs 12,326 crore in the same quarter in the previous fiscal. As a result, the operating profit of the bank rose to Rs 3,561.95 crore during the quarter as against Rs 2,839.50 crore in the same period a year ago.
On the way forward, Rao said, credit is expected to grow 8-10 per cent by March 2020. NIM will hover around 2.40 per cent.
"We have not removed the focus from non-core assets but the important thing is that capital is currently available and we have an important task of amalgamation exercise besides we need to protect the valuations of our sister concerns and our wholly-owned subsidiaries.
At this point of time, he said, the bank does not need to raise capital from the market till March.
During the quarter, the bank received capital of Rs 16,061 crore from the government for undertaking amalagamation and meeting growth requirement.
Following the infusion, the capital adequacy ratio of the bank increased to 14.07 per cent from 10.08 per cent in the same period a year ago.
Also the shareholding of the government also increased to 83.19 per cent from 75.41 per cent in the previous quarter.
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