Expect profit in every quarter of FY21: PNB MD
Punjab National Bank hopes to post net profit in every quarter of the current fiscal year, mainly due to its treasury operations, even as it expects the economy to fully recover by January 2021. The bank earned over ~1,100 crore from treasury operations in the fourth quarter of 2019-20, due to lower interest rates in government securities.
Punjab National Bank expects to post net profit in every quarter of the current financial year (FY21), mainly on the back of its treasury operations, even as it expects the economy to fully recover only by January 2021.
“We expect moderate profit in every quarter of FY21. The organisational structure after the amalgamation will be effective from July 1 and we will be able to take benefits of a bigger bank from the third and the fourth quarter,” PNB’S Managing Director and Chief Executive Officer S S Mallikarjuna Rao said at a press conference in New Delhi on Saturday, a day after announcing its Q4FY20 results.
From April 1, Oriental Bank of Commerce and United Bank of India have amalgamated into PNB.
The bank earned over ~1,100 crore from treasury operations in Q4FY20 due to lower interest rates in government securities after the Reserve Bank of India reduced the policy repo rate, compared to ~400500 crore it earned in the previous quarters.
It expects to earn ~1,800 crore from the segment in the first half of FY21. “We will be able to take advantage of the treasury business in the first two quarters of FY21, following which the gains might be limited as the rates may firm up but by then we will be able to do more lending,” Rao told Business Standard.
He added that the state-owned bank will be able to take care of its provisioning needs by the end of the second quarter.
The bank’s prime goal in FY21 would be to strengthen its balance sheet so that it can create a better case for the amalgamated entity in the next financial year too, Rao said.
“We had planned a credit growth of 12 per cent before the pandemic had hit. Now, we see economy coming back only from October 1 in a mild manner and from January 1 (2021) in an effective manner, so the credit growth may be at around 6 per cent,” the MD and CEO said.
About 30 per cent of its retail and micro, small and medium enterprises (MSME) borrowers have availed of the moratorium on their loan repayments, allowed by the RBI to tide over the impact of the Covid-19, the bank said, adding that it is a “good sign”. This, despite the fact, that the bank had extended moratorium to all its retail and MSME borrowers automatically. But 70 per cent of such borrowers decided to pay back.
However, for non-banking financial companies (NBFCS), the bank has been passing the benefits of the moratorium only on a caseto-case basis. Of the 145 NBFC accounts, 31 have availed of the moratorium.
The bank failed to register a profit in Q4 as it could not recover money from big accounts such as Bhushan Power and Steel amid the pandemic. The bank reported a pretax loss of ~969 crore in Q4, compared to a loss of ~7,209 crore in the corresponding period last year.
PNB recovered over ~10,000 crore from its bad loan accounts in the previous financial year. It expects a recovery of ~6,000-8,000 crore this year.
Around ~2,800 crore worth of borrowings remained standard for the bank in 2019-20 because of RBI’S dispensation to not treat certain stressed accounts as NPA. The bank had to make provisioning of around ~140 crore towards it, which it would continue to make in Q1 of this year, too.
Rao said the bank will take a view on raising capital for the amalgamated entity after preparation of its opening balance sheet which will be taken up in the next board meeting scheduled to be held in the coming two weeks. “We will assess if we have to go to the government to take the market route. On a standalone basis, PNB is sufficiently capitalised,” he added.
The bank’s capital adequacy ratio, considered to be one of the key indicators of its health, inched up to 14.14 per cent in this quarter, compared to 14.04 per cent in the previous one. The RBI requires banks to maintain the ratio at 11.5 per cent. Banks are required to maintain a minimum level of capital to ensure they do not lend all the money they receive as deposits and keep a buffer to meet future risks.