The Hindu Business Line : PNB Q4 net down 17% on higher provisioning

New Delhi May 23 A higher provisioning for standard assets and retirement benefits of employees besides depreciation in certain government securities portfolio has impacted Punjab National Bank's (PNB) fourth-quarter bottomline performance in fiscal 2006-07.

PNB, a public sector bank, has reported a 17 per cent decline in net profit for the fourth-quarter ended March 31, 2007 to Rs 237.70 crore against Rs 288.67 crore in the same quarter in the previous year.

Total income increased 26.85 per cent to Rs 3,712.79 crore (Rs 2,926.93 crore).

However, net profit for the financial year 2006-07 increased 7 per cent to Rs 1,540 crore against Rs 1,439 crore in the previous year.

"Our net profit grew 7 per cent despite additional provisioning of over Rs 200 crore in that year. As against total provisioning of Rs 1,480 crore in 2005-06, we have in 2006-07 made provisions to the tune of Rs 1,691 crore," Mr Gupta said.

The board of directors has declared a final dividend of 60 per cent, taking the overall dividend for 2006-07 to 100 per cent against 90 per cent in 2005-06.

Retirement benefits

As a measure of prudence, PNB has also adopted the ICAI's revised AS-15 on retirement benefits, leading to additional provisioning of about Rs 200 crore.

This is even as the ICAI's revised AS-15 is applicable from April 1, 2007.

The Executive Director, Mr K Raghuraman, said that bank had taken a hit of Rs 284 crore in 2006-07 towards depreciation in government securities arising from hardening of yields.

He added that interest rates are likely to soften in the next two-three months as demand for credit would be much lower in this period, which is usually referred to as slack season.

To raise Tier-II capital

Meanwhile, Mr Gupta said that PNB would raise tier-II capital of Rs 500 crore before June 30.

Also, plans are afoot to make an equity offering sometime this fiscal, which could lead to trimming of Government stake in PNB from the current 57.8 per cent to 51 per cent.

"We need about Rs 2,000 crore of capital this fiscal for funding business growth, overseas expansion and also to meet Basel-II requirements. I have today given approval for raising Rs 500 crore of Tier-II capital before June 30", Mr Gupta said.

Enough headroom

He said that PNB has enough headroom to raise Tier-II capital.

"After June 30, an assessment of the capital need would again be made and decisions taken accordingly.

"As of now, no decision has been made on when the public offering would be made," he said.

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