However, according to a PNB release, the net profit in 1997-98 included Rs 216.56 crore (net of taxes) on account of an extraordinary item of write back of excess depreciation on approved securities. "Exclusive of this item from the previous year's net profit, the growth in net profit works out to 42.7 per cent," the release said.

As far as gross profits were concerned, the bank recorded an increase of 2.5 per cent during the year at Rs 821.27 crore. Excluding the provision of Rs 80 crore towards the proposed wage revision, the gross profit would work out to be Rs 90.27 crore, representing a growth of 12.5 per cent, according to the bank.

Owing to depressed market conditions, there was a decline in profit on sale of investments from Rs 237 crore to Rs 79 crore during 1998-99, the release stated. As a result, non-interest income slidby Rs 92 crore. Commission, exchange and brokerage, however, increased from Rs 280 crore to Rs 328 crore, registering a growth of 17.2 per cent compared with 12.8 per cent in the previous fiscal.

Total expenses continued to show deceleration and grew by only 9 per cent during the year compared with 9.3 per cent during the last fiscal. While the interest expanded showed a slower growth rate of 3.6 per cent during 1998-99 comapred with 10.7 per cent previously, growth in other operating expenses was higher at 21.9 per cent compared with 6 per cent in the previous year. This was mainly on account of provision of Rs 80 crore for a proposed wage revision.

The press release said that despite fall in interest rates and increasing strain on interest margin, the bank's net interest margin improved from 3.25 per cent during 1997-98 to 3.57 per cent during 1998-99.

The bank's capital and reserves at the end of March 1999 increased to Rs 1,929.75 crore compared with Rs 1,754.14 crore during the previous financialyear, registering a growth of 16.7 per cent. Despite the return of equity of Rs 138.33 crore to the Government during 1997-98, the bank's capital to risk asset ratio at the end of 1998-99 increased to 10.79 per cent from 8.81 per cent previously.

Total income during the year rose to Rs 4,993 crore, registering a growth of 7.9 per cent. Interest income as per cent to working funds showed an improvement at 10.03 per cent, up from 9.98 per cent in the previous year.

Insight

Not the real picture
The performance of the banking system has to be looked at in terms of the write-backs that banks benefited from in the previous year. PNB is not an exception. If the large write-backs made last year is excluded the performance appears better. However a point of caution is that independent of the write-backs, banks have had a higher share of provisioning to be made for wages in 1998-99, which has dented gross profit growth. But commenting on the results would not be proper without seeing theaccounting policies adopted and auditors qualifications appended for the year. Most banks have resorted to accounting gimmicks to try and bolster profits in what was a bad year.

Aaron Chaze