Money & Banking

PNB plans Rs 6,000 cr capital mop up this fiscal

Our Bureau New Delhi | Updated on January 09, 2018


First quarter net profit up 12%

Punjab National Bank (PNB) will look to raise equity capital to the tune of Rs 3,000 crore this fiscal to fund its business growth, Sunil Mehta, Managing Director & CEO, has said.

This will be part of the overall Rs 6,000-crore capital that the bank intends to raise this fiscal. The remaining Rs 3,000 crore is expected to be raised in the form of Additional Tier-I bonds, which also qualify as capital.

The board of directors of this public sector bank had given their approval for raising equity capital to the tune of Rs 3,000 crore through follow-on public offering/rights issue/qualified institutional placement /ESPS/ESOP route, Mehta told a press conference to announce the first quarter results.

Additional Tier-I capital

Besides this equity raising plan, PNB will also look to raise another Rs 3,000 crore through Additional Tier-I capital in the form of bonds, Mehta said.

Of the planned Rs 3,000 crore of Additional Tier-1 capital, PNB has already raised Rs 1,500 crore through bonds at a low rate of about 9 per cent, he said

“Total Rs 6,000 crore capital augmentation will take place in Tier-I capital this financial year”, Mehta said.

Besides capital mop-up of Rs 6,000 crore, PNB will also look to raise Rs 1,000 crore from the sale of non-core assets, including stakes in some subsidiaries, Mehta told BusinessLine.

Q1 net profit

Aided by lower cost of funds and increased retail lending (grew 16 percent y-o-y), PNB has reported a 12 per cent increase in net profit for the first quarter ended June 30 at Rs 343.40 crore (Rs 306.36 crore).

This latest bottomline performance was higher than March 2017 quarter net profit of Rs 261.90 crore.

In the June quarter this fiscal, PNB’s total income was higher at Rs 14,468 crore (Rs 13,475 crore) Operating profit grew 14.1 per cent to Rs 3,217 crore (Rs 2,820 crore).

'Mission Parivarthan'

Asked as to what had led to the improved first quarter bottomline performance, Mehta said that the “Mission Parivarthan” that the bank had embarked upon was a driving force.

“Our entire workforce has now started doing cost benefit analysis of each transaction we are doing. The idea is to get higher profitability of every transaction. Our retail lending has also grown faster at 16 per cent. Our cost consciousness and lower cost of funds have also helped,” Mehta said.

Asset quality

Mehta also hoped that there would be resolution in the nine (where PNB had exposure) of the 12 large accounts that have been referred by the RBI to be taken up for the insolvency process.

“Our total exposure in these nine accounts is Rs 11,000 crore. The additional provision requirement for us this fiscal will be Rs 1,000 crore, which we can easily absorb in our operating profit. Going forward, insolvency resolution is going to present a rosy picture because in most of these accounts we already have higher provisioning,” he said.

Additional provisioning

Mehta said that he was hopeful that PNB would not be required to make additional provisioning of Rs 1,000 crore for these nine accounts as resolution may come faster.

For the quarter under review, provision for bad debts stood at Rs 2,560 crore (Rs 3,166 crore). Fresh slippages in non performing assets stood at about Rs 6,018 crore, lower than the level in the same quarter last year.

As of end June 2017, Gross NPA ratio stood at 13.66 per cent and net NPA ratio stood at 8.67 percent.

“This year will be the year of resolution. We expect major progress in resolution. Moreover under Mission Parivarthan we are focused on recovery”.

Savings bank rate

Asked if PNB also plans to cut savings bank interest rate on the same lines as recent SBI move, Mehta said that a formal call will be taken in the next one week. “Our ALCO has to decide this”, he said.

Published on August 02, 2017

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