Punjab National Bank, the heavyweight in the PSBs sector, has shown improvement and recorded a surprising profit for the December quarter which indeed is treated as a turnaround. Main reasons attributed are:
- A notable decline in Risk Weighted Assets
- Government’s Capital infusion
- Improvement in Capital Ratios
- Fall in Provisioning
However, the bank would be compelled to continue with its pressure, due to a
- Slackness in recovery observed.
- Huge bad loan book of over Rs. 77,000 crore
- Substantial write offs
- Weak Core performance.
- The bank reported a loss of Rs. 4,532 crore in September quarter, and has now shown a modest profit of Rs. 247 crore. However, the bank which has booked over Rs.1000 crore in the past and with its continued asset quality showing a poor status, what the bank has earned is not too inspiring.
- The Tier 1 Capital has improved because of Government’s infusion of Rs. 8,247 crore in FY 2019 and also a considerable reduction in the bank’s risk-weighted assets. However, sharp slippages would affect earnings and eat away the bank’s capital which would in turn affect the loan portfolio which has already taken a big hit.
- Bank’s RWA (Risk Weighted Assets) has fallen from Rs. 4.5 lakh crore in March 2018 quarter to around Rs. 4 lakh crore in December which is around 11%
- This along with the Government’s capital infusion has helped the bank in improving its Tier 1 Capital to 8.25% in the latest December Quarter.
- Overall advances have remained flat from March 2018 quarter and domestic advances have moderately grown by 6% between March and December 2018.
- Due to Nirav Modi scam, and also RBI’s Diktat in February matter got worsened in the current Fiscal.
- The bank’s core net interest income grew by 7.6% year-on-year in the latest December quarter.
Weak core profitability makes the bank vulnerable to sharp slippages and risk in provisioning in the ensuing quarter.