Punjab National Bank crisis goes from bad to worse, check out massive loss

Punjab National Bank (PNB) on Tuesday reported a Rs 940 crore loss in the quarter ended June 30 as bad loans continued to haunt the bank. If it was not for a tax writeback of Rs 623 crore, the loss would have been steeper. The bank had posted a net profit of Rs 343.40 crore in the year-ago period.

While the bank narrowed its losses from the preceding quarter when it had reported its highest quarterly loss Rs 13,417 crore on account of the letters of undertaking (LOU) scam involving diamantaires Nirav Modi and Mehul Choksi. The Rs 14,356 crore LOU scam had accentuated the losses.

The provisions for bad loans in the June quarter went up 94.6% to Rs 4,982 crore over the year-ago period, including for part of the scam. The provisions for the scam are being spread over four quarters after the bank got a special dispensation from Reserve Bank of India (RBI). The regulator had allowed the lender to make 25% of the provisions in the fourth quarter ended March 2018 and spread the remaining provisions over the next three quarters.

However, the bank made 50% of the provision amounting to Rs 7,178.42 crore in the March 2018 quarter and a further provision of Rs 1,863.46 crore in the June quarter.

The remaining provisions will be made during the next two quarters. The bank Board also approved an employee stock option of Rs 10 crore. Gross non-performing assets (NPAs) of the bank were Rs 82,888.79 crore at the end of June quarter, rising 43% over the year-ago period. Fresh slippages during the quarter stood at Rs 5,250 crore.

The bank stepped up its recovery efforts, recovering Rs 8,445 crore in the June quarter, with half the recoveries coming from the resolution of NCLT accounts of Bhushan Steel Ltd and Electrosteel Steel Ltd that helped the lender recover Rs 3,200 crore during the quarter. The bank also monetized assets worth Rs 167 crore during the quarter.

“The bank has been prompt in taking corrective measures. The bank has segregated sourcing and processing of loans besides setting up a large centralised processing centre for large loan processing. It has also started a stressed asset management vertical to recover bad loans,”  Sunil Mehta, managing director and chief executive officer, PNB, said at a press conference.

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The bank is targeting a recovery of Rs 20,000 crore in the first half of the financial year. Net interest margin, a key measure of profitability, improved to 2.9% from 2.56% in the year-ago period. Net interest income was up 21.7% to Rs 4,692 crore.

During the quarter the bank also implemented some cost saving measures, including shutting down 221 ATMs, eight branches and 35 international and domestic offices.

Source: DNA Money