Punjab National Bank?s net profit remained almost flat at Rs 1,011.3 crore in the third quarter of the current fiscal (Q3 FY10) as compared to Rs 1,005.8 crore in Q3 FY09, as falling treasury income and higher provisioning hit profits. A provision of Rs 275 crore towards wage revision also impacted profitability. Despite the flat profits, PNB has proposed a 100% interim dividend for its shareholders.
PNB joins other public sector and private banks such as the State Bank of India and ICICI Bank whose treasury profits have fallen significantly due to losses on their holdings of government securities. The treasury profit of PNB fell 54% to Rs 157 crore in Q3 2010 as compared to Rs 341 crore in Q3 2009. The bank?s core operation profit, which excludes treasury profit, though, grew at 13.7% to Rs 1661 crore in Q3 2010.
The bank?s net interest margin (NIM), a gauged of operational efficiency, fell marginally to 3.84% in Q3 2010 from 3.85% in Q3 2009. NIM is arrived at by dividing a bank?s net interest income ? the difference between lending rate and cost of funds ?by its average interest-earning assets. PNB CMD KR Kamath said the bank hopes to maintain a NIM of 3.5% in 2009-10.
PNB?s total income too remained flat at Rs 6,236.55 crore in Q3 FY10. It had grown at a robust 51% in Q3 FY09. Net profits of the major commercial banks have remained muted or fallen in the third quarter of current fiscal due to a combination of eroding treasury profits, higher provisioning and slower credit expansion.
The country?s second largest lender, ICICI Bank, too registered a 13.4% fall in net profits in the third quarter, mainly due to erosion in treasury income.
Banks earn treasury income by trading in government securities. The Reserve Bank of India mandates banks to invest at least 25% of its total deposits in government securities.