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The performance of PNB in the latest March quarter has been dismal. Yet, the market cheered, perhaps hoping that the worst is over for the beaten down stock. PNB reported record losses of ₹5,367 crore in the March quarter; it would have been steeper but for a tax write-back of about ₹1,900 crore.
Weak core performance and a spike in bad loan provisioning eroded the bank’s earnings. Its core net interest income fell 27 per cent YoY during the March quarter. This left it with no wiggle room, as bad loan provisioning trebled. Bad loans are now 12.9 per cent of loans.
While the RBI’s asset quality review led to the surge in bad loans in the last two quarters, further stress cannot be ruled out.
Majority of the slippages into bad loans during the quarter was from restructured assets; this can continue. The bank also has sizeable loans restructured under the 5:25 scheme and strategic debt restructuring that carry lower provisioning.
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