PNB logs biggest-ever loss of Rs 13,417 cr

Lender makes Rs 7,178-cr provisions to cover Nirav Modi-related fraud

Fraud-hit Punjab National Bank (PNB) reported a Rs 13,417 crore fourth-quarter net loss on Tuesday, the biggest ever by an Indian lender as the state-run bank booked provisions to cover a massive fraud.

In what has been dubbed the largest fraud in Indian banking history, PNB - the second-biggest state-run lender and fourth-biggest overall - disclosed in February that two jewellery groups had defrauded it of more than $2 billion, raising credit overseas from mostly other Indian banks with fake guarantees issued by rogue PNB staff.

PNB said on Tuesday it had set aside a higher-than-required Rs 7,178 crore in the three months to March 31, or half of the total Rs 14,357 crore it owes other banks for the illegal guarantees. That led to a more than tripling of its total provisions from a year earlier to Rs 20,353 crore.

The bank, which has been allowed by the Reserve Bank of India (RBI) to spread the fraud-related provisions over four quarters, said it would set aside the remaining money over the three quarters beginning April 1.

On Monday, the bank board, following government diktat, had divested two executive directors -- K V Brahmaji Rao and Sanjiv Sharan-- of all financial and executive powers. The action came after CBI named them in a chargesheet filed in the Nirav Modi fraud case.

Since these two executive directors did not attend Tuesday’s board meeting to consider and approve the fourth quarter financial result, so their signatures are not on the annual financial results.

The total income for the fourth quarter also declined to Rs 12,945.68 crore from Rs 14,989.33 crore in the yearago period. The bank has witnessed deterioration in gross net performing assets (NPAs) or bad loans, which rose to 18.38 per cent of gross advances at the end of March this year, as against 12.53 per cent a year ago.Net NPAs were also soared to 11.24 per cent against 7.81 per cent year ago.

In absolute term, the gross NPA of the bank surged to Rs 86,620 crore in the fourth quarter as compared to Rs 55,370 crore in same quarter a year ago. Similarly, the net NPA also rose to Rs 48,684.29 crore from Rs 32,702 crore at the end of March 2017.

As a result, provisions for the bad loans jumped fourfold to Rs 16,202.82 crore for the quarter under review compared to Rs 4,910.39 crore parked aside in the same period a year ago.

Total provisions other than tax also increased to Rs 20,353.10 crore as against Rs 5,753.51 crore in the same quarter of the previous fiscal.

Even on operating profit basis, the bank had loss of Rs 447.38 crore in the quarter as against Rs 6,231.79 crore profit in the year-ago period.

PNB’s capital ratio fell to 9.2 percent at the end of March from 11.66 percent a year ago.

“Their capital is very low, and a bank needs it to sustain growth,” said Yuvraj Choudhary, an analyst at Mumbai brokerage Anand Rathi, who said PNB’s reported loss was more than triple his estimate, calling it a “major concern”.