Bad Loans Recoveries and Profitability at PNB

Bad Loans Recoveries and Profitability at PNB

Punjab National Bank

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:

  1. A notable decline in Risk Weighted Assets
  2. Government’s Capital infusion
  3. Improvement in Capital Ratios
  4. 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.

Working Details:

  1. 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.
  2. 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.

Other Information:

  • 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.

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