Punjab National Bank has reported a 14 per cent increase in its net profit for the three-month period ended September 30.

Analysts termed the results as below expectations. The market was also not enthused by the results with the shares of the bank falling by over 2.5 per cent to close at ₹931.50 apiece on Tuesday on the BSE.

The bank said that its net profit increased to ₹575.34 crore from ₹505.49 crore while income grew by 11.92 per cent to ₹13,020.46 crore from ₹11,632.84 crore in the corresponding period of the previous fiscal.

However, the bank’s bad loan or non-performing assets (NPA) is on the rise. According to the bank, its net NPA as a percentage of total advances stood at 3.26 per cent at the end of September 30, 2014 against 3.07 per cent during July-September of 2013-14. The main cause for this has been poor performance by the manufacturing sector, which has increased bad debts for the entire banking sector, with PNB being no exception.

Another factor, which disappointed the market, is the net interest margin (the difference between interest paid on deposits and interest received on loans). The bank’s NIM came down to 3.18 per cent (3.42 per cent during the corresponding period of the previous fiscal). PNB attributed two reasons for the lower NIM – less-than-expected credit growth and refund of about ₹294 crore on account of funded interest term-loans.

For the full year, the bank gave guidance of NIM being in the range of 3 to 3.25 per cent. For the first six month, it is 3.3 per cent and there efforts will be made to improve it, PNB said.

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