Punjab National Bank Profit Plunges, Sees More Bad Loans

Mumbai: Punjab National Bank (PNB, India's fourth-biggest state-run lender by assets, posted a 93 percent fall in quarterly profit and said it expected bad loans to rise further in the current quarter as a central bank-directed clean-up exercise continues. 

PNB shares fell as much as 6.5 per cent to Rs 88.20 in Mumbai on Tuesday. 

Indian banks, burdened by their highest stressed-assets ratio in 13 years, have been asked by the Reserve Bank of India to treat some troubled accounts as non-performing even if actual default has yet to happen and make adequate provisions. 

The RBI's directions followed Governor Raghuram Rajan's call for clean up of bank balance sheets by March 2017. The banks have been asked to make required provisions during the third and fourth quarters of this fiscal year ending in March. 

"The surgery is not over," PNB Chief Executive Usha Ananthasubramanian told a news conference in New Delhi. "The next quarter as well ... I should say the clean-up process is underway," she said of the three months to March. 

PNB, the first major state-run lender to report third-quarter results, said its net profit tumbled to Rs 51 crore for the three months to December 31 from Rs 775 crore a year earlier, hurt by sharply higher sour debt provisions. 

Analysts on average had expected a net profit of Rs 707 crore, according to data compiled by Thomson Reuters. 

The quarterly loss would have been Rs 858 crore if it was not cushioned by a tax write-back of Rs 901 crore. 

Gross bad loans as a percentage of total loans were 8.47 per cent at end-December, compared with 6.36 per cent in the previous quarter. Provisions, including for bad loans, more than doubled from a year earlier to Rs 3,776 crore. 

PNB's bigger state-run peers State Bank of India, Bank of Baroda and Bank of India report third-quarter results later this week.