Scam-tainted PNB posts record Rs13,417 crore loss
After initially disputing its liability, PNB paid seven banks Rs6,500 crore towards LoUs in the March quarter
New Delhi: State-run Punjab National Bank (PNB) on Tuesday reported a Rs13,417-crore loss for the January-March period, the largest quarterly loss posted by an Indian lender, reeling under a $2-billion fraud, tighter loan classification norms and losses in its bond portfolio.
The bank had reported a profit of Rs262 crore in the same quarter a year ago.
In February, Punjab National Bank, India’s second largest public sector lender by assets, reported a massive fraud, where companies linked to jewellers Nirav Modi and Mehul Choksi fraudulently secured letters of undertaking (LoUs) from its Brady House branch in Mumbai to borrow from banks abroad.
After initially disputing its liability, Punjab National Bank paid seven banks Rs6,500 crore towards these LoUs in the March quarter.
Punjab National Bank has now estimated its total exposure to group firms of Modi and Choksi, including LoUs and other credit exposure, at Rs14,356 crore.
The bank has provided for half of this amount in the March quarter and said the remaining half will be spread across the three quarters of 2018-19.
The bank also divested two of its executive directors—Sanjiv Sharan and K. V. Brahmaji Rao—named in a charge sheet by the Central Bureau of Investigation (CBI) from all functional responsibilities.
The government has initiated the process of their removal, along with former managing director and chief executive officer of Punjab National Bank and the current chief of Allahabad Bank, Usha Ananthasubramanian.
Anathasubramanian was also relieved of all her responsibilities at the Allahabad Bank board meeting on Tuesday.
In all, CBI has named 22 individuals, including mid-level bank employees, and three entities in the charge sheet.
In a stock exchange filing, Punjab National Bank said provisions rose nearly three-fold to Rs20,353 crore from Rs5,753 crore a year ago. Of this, provision for non-performing assets (NPAs) was Rs16,203 crore, against Rs4,910 crore a year ago. Gross NPAs rose to 18.38% from 12.53% a year ago and net NPAs were at 11.24% against 7.81%. In absolute numbers, gross NPAs rose to Rs86,620 crore from Rs55,370 crore.
The rise in NPAs was in line with results of other lenders announced till now.
On 12 February, the Reserve Bank of India withdrew a host of loan restructuring schemes and set a 180-day timeline for resolving stressed loans, forcing banks to recognize them as NPAs and making provisions for them.
Punjab National Bank’s losses vastly exceeded analysts’ estimates. A Bloomberg poll of 14 analysts had estimated, on an average, that the bank will report a standalone loss of Rs3,835 crore in the quarter ended March.
For the full year, PNB reported a loss of Rs12,283 crore.
The bank also used the regulatory dispensation to spread the impact of higher gratuity payouts as well as bond losses over a few quarters, PNB said.
Other profitability indicators like net interest income, other income and net interest margin were also under pressure.
While net interest income contracted 17% to Rs3,063 crore, other income also halved to Rs1,561 crore. Net interest margin, a key measure of profitability, fell to 1.9% in the quarter from 2.51% in the corresponding year-ago period.
Capital adequacy ratio was at 9.2% as of March 2018, as against 11.66% as of March 2017.
PNB shares fell 3.8% to Rs86 on BSE, while the benchmark Sensex was little-changed.
The bank also said RBI had flagged a divergence in asset classification for 2016-17.
The divergence was Rs 2,207 crore in gross NPAs, Rs1,414 crore in net NPAs and Rs792 crore in provisioning.