Punjab & Sind Bank aims to maintain its profitability around the previous fiscal’s level of Rs 1,039 crore in FY23 as well despite elevated treasury losses, managing director and chief executive Swarup Kumar Saha said.
In a change of strategy, the bank plans to bolster “other incomes” by aggressively focusing on wealth management, credit cards and insurance businesses, opportunities which the lender has not yet exploited much. The bank has reported an 18% year-on-year rise in its net profit to Rs 205 crore for the June quarter despite a mark-to-market (MTM) loss of Rs 109 crore — the loss stood at Rs 5 crore in the March quarter.
In an interview with FE, Saha, who took over in June, highlighted the need to explore the huge untapped potential in this “other incomes” category. “We look forward to compensating our MTM losses with other incomes this fiscal. Some small MTM loss may come in the second quarter as well, but we can absorb that easily,” he said. Most banks have suffered substantial MTM losses in the June quarter due to a sudden rise in interest rates.
Punjab & Sind Bank intends to widen its geographical reach beyond the stronghold (northern India) and set up 25-30 viable branches in Maharashtra, Gujarat and Rajasthan, Saha said. That will help it better capture MSME businesses. Currently, 1,189 of the bank’s 1,526 branches are in northern India, with only 111 branches in western and 56 in central India.
Given that about 80% of the bank’s credit portfolio is on a floating rate (30% is repo-linked and another 50% linked to MCLR), any hike in the interest rate by the RBI will be passed on to borrowers, he said, ruling out any hit to the bank’s profitability due to rate hikes.
The lender intends to raise its credit by 15% from a year earlier, which will ultimately bolster its income, Saha said. This will mainly be driven by the retail, agriculture and MSME (RAM) segment, where the growth is expected to be 20-22% in FY23. This segment will account for 50-52% of the bank’s advances.
Conceding that the bank didn’t have a broad bouquet of products as it should have, Saha said his focus is to change this. “Yes, we didn’t have credit card business, we don’t have mutual fund and demat businesses and we are under-penetrated in the insurance business. These are all the avenues which will give me good ‘other incomes’,” he said.
The bank’s “other incomes” stood at Rs 50 crore in the June quarter, against Rs 29 crore a year before. Of these, income from brokerages and commissions amounted to Rs 23 crore. Saha wants this to be raised by about Rs 100 crore this fiscal as there is a huge scope for expansion. He said the bank’s yield on investments stood at a healthy 6.71% in the last quarter, above 6.2-6.4% for many banks.
Saha said the bank is working towards reducing its net non-performing asset ratio to below 2% by the end of this fiscal, from 2.56% as of end-June. It targets Rs 2,500-crore recovery in FY23, compared with Rs 2,000 crore in the previous fiscal.
Punjab & Sind Bank has zeroed in on five accounts worth Rs 528 crore for transfer to the National Asset Reconstruction Company (NARCL).