Punjab National Bank's MD and CEO Ch. SS Mallikarjuna Rao is confident that the bank will record profits in the fourth quarter and achieve the overall indicated profit of ₹2,000 crore for the current fiscal, despite pandemic induced challenges.

The public sector bank is also confident of keeping the gross NPA level as a percentage of advances below 14 per cent and net NPA level below 5 per cent by end-March this fiscal, Rao told a virtual press conference on Saturday, after the announcement of the Q3 financial performance.

It maybe recalled that PNB senior management had at end of September this fiscal guided for gross NPA of less than 14 per cent and net NPA of 5 per cent by end March 2021.

“We still retain that (guidance). While challenge has been there for Q3 and SC judgement is holding back on identification of NPA, January 2021 appears to be better in terms of collections. We are very confident we will be able to control. Our effort will be to maintain at the same level as we have declared today...but the stress in the system for which we have done provisioning, we would like to see that stress removed in Q4,” he said.

Although the Supreme Court is yet to pronounce final judegment on the NPA recognition matter, PNB has made an assessment, and based on that made adequate provisioning in the financial statements for the quarter ended December 31, 2020, he said.

As of end December 2020, PNB, India's second largest public sector bank, had gross NPA of 12.99 per cent and net NPA of 4.03 per cent. This was lower than the gross NPA of 13.43 per cent and net NPA of 4.75 per cent in September 2020.

On Friday, PNB reported a net profit of ₹506 crore for the third quarter ended December 31, 2020. For the first half this fiscal, PNB had reported a net profit of ₹929 crore.

“We are looking at market conditions to optimise the profitability in terms of credit and treasury,” he said, exuding confidence of good fourth quarter performance. “If you look at the performance of PNB in last three years, it is slowly and steadily coming to profitability in terms of business and strengthening of asset quality,” he said.

Bad bank

Rao said that the concept of a bad bank was welcome initiative. He that the proposed initiative is going to be a facilitator to bring all the approvals for the bidder at one go and that it is going to be a single window process.

In his view, the bad bank at the initial stage will only see “transfer” of assets from the lender and will not be a “purchase” transaction. “Because this is only a transfer of assets, I don’t expect any bottlenecks. Within one year bad bank will get settled and attain maturity,” he said.

Although the Finance Ministry has categorically said that government will not infuse any capital in the bad bank, Rao felt that capital requirement will only be moderate and the banks themselves will be able to fork this out. “Capital requirement will arise only when bad bank purchases from the banks. It will not be a purchase as I understand it will be a transfer which will not require capital at the higher level. It will require moderate capital,” he said.

Engaging with investors

Rao indicated that PNB would begin engaging with investors to gauge the appetite for further qualified institutional placement (QIP) from Monday. It maybe recalled that PNB had in December 2020 raised ₹3,788 crore via QIP, which fell short of the announced targeted mop up of ₹7,000 crore. “We will do the remaining portion of QIP at an appropriate time. It could happen even before this fiscal end,” he said.

Rao also said that PNB would raise Additional Tier 1 (AT-1) capital of ₹2,500 crore before end March.

Till date, PNB has raised ₹8,283 crore out of the ₹14,000 crore capital that it last year set out to raise from the market. Rao also said that PNB is not looking to seek any capital support from the government and would look to “stand on its own legs” and mobilise capital from the market.

As regards plans for life insurance companies which it has invested in and whether the bank would review shareholding now that FDI limit has been raised to 74 per cent in budget, Rao said that no such immediate plans are there on this front.

PNB chief pointed out that both PNB MetLife (PNB holds 30 per cent) and CHOICE (PNB holds 23 per cent) are unlisted companies, and would first be required to be listed to discover the right enterprise valuation.

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