PNB posts second straight quarterly loss at Rs 940 crore on Nirav Modi fraud-related provisions

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Updated: August 7, 2018 1:20:21 PM

India's Punjab National Bank reported its second consecutive quarter of loss as the country's second-biggest state-run lender set aside more funds for a massive fraud it disclosed earlier this year.

PNB in February said it had been defrauded by two jewellery groups which raised more than billion credit overseas using fake guarantees. (Image: Reuters)

Punjab National Bank reported its second consecutive quarter of loss on Tuesday as India’s second-biggest state-run lender set aside more funds for a massive fraud it disclosed earlier this year. Net loss was 9.40 billion rupees ($136.72 million) for the three months to June 30, compared with a profit of 3.43 billion rupees a year earlier. On average, 15 analysts had estimated a loss of 24.18 billion rupees, according to Thomson Reuters I/B/E/S.

The figure is smaller than a 134.17 billion rupee loss reported in the previous quarter, in what was the steepest-ever loss for an Indian bank. PNB, the fourth-biggest bank by assets among all of India’s lenders, in February said it had been defrauded by two jewellery groups which raised more than $2 billion in credit overseas using fake guarantees provided by the bank’s staff in Mumbai.

PNB’s total provisions in the June quarter were 57.58 billion rupees, including 18.63 billion rupees on account of the fraud, the bank said in a statement. Of the total 143.57 billion rupees PNB owes banks for the illegal guarantees, it had set aside 71.78 billion rupees in the March quarter. The central bank has allowed PNB to spread the fraud-related provisions over four quarters to December 2018.

Indian banks, including PNB, have also been hit by a surge in bad loans in recent years and have seen provisions accelerating as part of a clean-up exercise that includes sending defaulting borrowers into a nascent bankruptcy court framework. PNB’s gross bad loans as a percentage of total loans was 18.26 percent at the end of June, compared with 18.38 percent at the end of March, and 13.66 percent a year earlier.

State-run banks accounted for more than 86 percent of the record 10.36 trillion rupees in non-performing loans held by India’s banks at the end of March. The government recently injected 28.16 billion rupees in PNB to shore up its capital base. The bank also plans to sell an at least 51 percent stake in PNB Housing Finance, jointly with private equity firm Carlyle Group LP, to raise funds. Shares of PNB fell as much as 3.8 percent after the results.

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