PNB posts Rs 4,532 cr net loss in Sept quarter on fraud-related provisioning

PNB posts Rs 4,532 cr net loss in Sept quarter on fraud-related provisioning

New Delhi: State-owned Punjab National Bank (PNB) Friday posted a net loss of Rs 4,532.35 crore in the three months to September, hit by huge provisioning against the massive fraud the lender detected in March 2018.
PNB, which is still reeling under the mammoth Nirav Modi scam, had posted a net profit of Rs 560.58 crore in the corresponding July-September of 2017-18.
On a sequential basis, this was the third straight quarterly loss for the PSU lender. PNB had reported a net loss of Rs 13,417 crore and Rs 940 crore in the March and June quarters, respectively.
“The bank is on track to bounce back. We have started our journey from a big setback in the last quarter of the last financial year and the bank is on way to absorb the entire thing in the current financial year itself so that we can bounce back during the same year itself,” its MD and CEO Sunil Mehta said at a media briefing here.
Mehta said the bank has upfronted the provisioning requirement against the fraud effect of Rs 14,356.84 crore, as around 86 per cent of the provisioning has been met so far.
Total income of the bank also fell to Rs 14,035.88 crore during the second quarter of 2018-19 as against Rs 14,205.31 crore in the same period of the previous fiscal, the bank said in a regulatory filing.
Bank’s asset quality witnessed deterioration year-on-year with gross non-performing assets (NPAs) hitting 17.16 per cent of gross advances as on September 30, 2018 against 13.31 per cent in the same period a year ago.
In absolute terms, gross bad loans or NPAs stood at Rs 81,250.83 crore at end-September against Rs 57,630.11 crore a year ago.
Net NPAs also rose to 8.90 per cent during the said quarter from 8.44 per cent as on end-September 2017. In absolute value terms, net NPAs were at Rs 38,278.84 crore as against Rs 34,570.15 crore.
Provisioning for bad loans and contingencies rose to Rs 9,757.90 crore for the quarter from Rs 2,440.79 crore a year ago. Of this, the provisions for bad loans or NPAs were Rs 7,733.27 crore as against Rs 2,693.78 crore a year ago.
However, asset quality improved sequentially with gross NPAs at 18.26 per cent as on June 30, 2018 and net NPAs at 10.58 per cent.
On the Nirav Modi fraud, PNB said it made provisioning of Rs 9,041.88 crore till June 30, 2018 and Rs 3,295.12 crore cover was set aside in the September quarter. The remaining provision will be made during the next quarter of this fiscal.
Mehta said, “We have upfronted the provisioning requirement in many of the cases. We have said already that in the first two quarters (of this fiscal) we require breathing time to absorb all these things so that we can do better. It is a process of cleaning and we have done and this will provide us a better hand in coming quarters.”
The processes which were found to be having some gaps have already been bridged, he said adding that the international payment verification system SWIFT is also integrated with the bank’s core banking solution (CBS) software.
Mehta said the type of unprecedented loss PNB saw is needed to be absorbed.
“Now we have already covered more than 86 per cent (of the fraud provisioning requirement) in totality. The purpose was that we wanted to cover up the entire loss in the shortest possible time,” he said.
The bank said it has recovered Rs 12,000 crore in the first half ended September.
On Bhushan Power and Essar Steel cases pending with NCLT for NPA resolution, he said that these accounts will hopefully be resolved in the current quarter (October-December) and “we can get write-back in this quarter”.
When asked about any recovery in the Nirav Modi scam, he said the case is being dealt legally now but “a good number of assets have been seized by Enforcement Directorate” and the bank will apply to recover those assets.
“We have initiated action wherever it was needed including in the US case where our claim has been recognised,” Mehta added. On IL&FS group companies’ loan defaults and PNB’s exposure, Mehta said the bank’s exposure is limited to around Rs 2,000 crore.
“We have exposure in IL&FS group entities’ and all these entities have got their own independent cash flow and all our accounts are standard. I think the entire problem was blown out of proportion. IL&FS has got certain issues but it is not to the magnitude it has been projected. Some of the assets are very good and performing,” he said.
Responding to a question on bank consolidation, in the wake of second such merger in the offing, PNB said the priority for the bank is to consolidated itself than to look for inorganic consolidation.
The PSU lender also said that it is focussed on branch rationalisation both domestically and globally.
The bank has merged two of its branches in Hong Kong. Representative offices in Shanghai and Sydney have been closed. The representative offices in Dubai and Dhaka are also in the process of closure. Domestically, branches are in the process of mergers or closures.
Nirav Modi and his uncle Mehul Choksi duped PNB of Rs 14,000 crore through issuance of fraudulent Letters of Undertaking (LoUs), in connivance with certain bank officials.
Among other key metrics, bank’s gross domestic advances grew by 14.3 per cent to Rs 4.47 lakh crore during the second quarter. The provision coverage ratio as at September 30, 2018 works out to be 66.92 per cent, PNB said. —PTI