Punjab National Bank (PNB) on Saturday reported a 11.59% year-on-year decline in net profit for the three months to September at R549 crore owing to persistent asset quality pressures.
Gross non-performing assets (GNPA) of the bank more than doubled to 13.63% in July-September from 6.36% in the year ago quarter. Net NPA also shot up to 9.1% during the quarter from 3.99% a year ago. Sequentially, there was an improvement in net profit as well as in NPA ratios. Sequentially, the bank’s net profit jumped 79.41% in the September quarter compared to June quarter due to improvement in interest and other income. The bank’s gross NPA was at 13.75% and net NPA at 9.16% in June quarter this year.
Total provisions made by the lender in Q2FY17 rose to R2,763 crore from R2,318 crore in the same period last year. Of this, provision towards NPAs also rose to R2,218 crore from R2,031 crore in the year ago period.
The huge jump in stressed assets of the bank is in line with other peer public sector banks (PSBs) who together have reported a massive jump in bad loans over the past year after implementation of the Reserve Bank of India-mandated asset quality review. The bad loans of the PSBs has shot up from R2.77 lakh crore in September 2015 to R5.59 lakh crore at end-June 2016.
As a consequence, higher provisioning has shaved off many PSBs’ bottom-lines due to reclassification of many accounts as NPAs to reflect the true value of the loans.
PNB’s provisioning coverage ratio as end-September 2016 works out to 53.32 %, lower than RBI’s benchmark of 70%.