A sharp rise in provisioning towards bad loans weighed on Punjab National Bank’s bottomline in the September quarter.
The bank’s net profit declined 11.5 per cent to Rs 1,066 crore (Rs 1,205 crore). NPA provisioning was higher at Rs 1,140 crore (Rs 319 crore).
The public sector lender’s financial performance was hit by incremental slippage in bad loans of Rs 4,544 crore in the second quarter and Rs 6,875 crore in the first half of this fiscal.
The recovery during the first half of the fiscal was Rs 954 crore, and during the current quarter was Rs 383 crore. The write-off was only Rs 50 crore.
“The bank had an option of presenting a better gross NPA ratio by writing off fully provided debts. But consciously we decided not to write-off any debts to keep the pressure on us and preferred to show gross NPA ratio at a higher level (4.66 per cent)”, K.R. Kamath, Chairman & Managing Director, said.
Kamath said that there was a possibility for the bank to write-off as much as Rs 900 crore and reduce gross non-performing assets (NPAs) by 0.3 to 0.4 per cent. But the management decided against it.
Pressure building
“There is a pressure building. We decided to let the pressure be on the management in facing a larger NPA number and work more vigorously to bring it down, rather than deriving false comfort by pruning it to a lower level by writing off”.
Kamath said that the bank would definitely take a call on write-offs based on the numbers of the subsequent two quarters. “We may go in for write-offs of bad debts”.
For the quarter under review, the bank restructured advances Rs 2,625 crore. As much as 11 per cent of the bank’s restructured book has turned into NPAs, Kamath later told Business Line .
Kamath said higher provisioning was on account of higher NPA slippage. It is difficult to answer as to whether the worst is over, he added.
“This is in some way a reflection of what is happening in the economy. We are quite hopeful, because there are some positives in this quarter. There are possibilities of economic downturn taking a U-turn. If that were to happen, then it may also take a U-turn on the NPA front. All depends on how the economy behaves in the next three months, he said.
Kamath said there was no concentration of NPAs in any particular sector or geography. He, however, declined to give any future numbers on the NPA front. “Internally we will work to contain delinquencies and come out with a better performance next quarter”.
Kamath also declined to comment on the Kingfisher Airlines account, which is not a standard asset for the bank. The 17-bank consortium will have to take a call on the matter, he said.
PNB shares declined 6.72 per cent at the National Stock Exchange on Friday to close at Rs 749.80. This was Rs 54.05 lower against the previous day’s close of Rs 803.85.