Punjab National Bank
BSE: 532461 | NSE: PNB | ISIN: INE160A01014 | Banks - Public Sector
- Directors Report
- Chairman's Speech
- Auditors Report
- Notes To Accounts
- Accounting Policy
- Finished Products
- Raw Materials
| Directors Report | Year End : Mar '08 |
The Bank completed eventful 113 years and has crossed several
milestones in its quest to satisfy the diverse requirements of its
customers. In the process, the Bank has gained the goodwill of its
around 3.7 crore customers, earned a strong brand image as one of
India’s most trusted brands, received recognitions and won various
awards. The Bank features at 11 66th position among Forbe’s Global 2000
list of world’s biggest companies. The Bank was bestowed ‘Corporate
Excellence Award’ by Amity International Business School, Amity
University, Noida.
The year 2007-08 reflects the Bank’s efforts to re-furbish its
overriding principle that the customer should benefit from his
relationship with the Bank. The Bank sees ‘Financial Inclusion’ as a
distinct opportunity and a business proposition, especially in the Indo
Gangetic area, where the Bank has inherent strength. For fully
exploiting the business potential with cost effectiveness, the Bank has
re-aligned its business processes with technology; pruned its
organisational structure to 3 tier from 4 tier making it more
horizontal; re-invented its human capital and formulated various
schemes. The Bank has also fully complied with revised AS-15 (relating
to accounting for retirement benefits) of Institute of Chartered
Accountants of India. In compliance with revised AS- 15, the
transitional liability has been adjusted out of Opening Reserves (net
of taxes) and the current year liability charged to Profit & Loss
Account.
Your Directors take pleasure in placing the Bank’s Annual Report for
2007-08 along with its audited annual financial statements.
Key Financial Highlights
Key highlights of the Bank’s performance in the year 2007-08
include the following :
1. Positive Earnings Momentum
Net Profit of Rs 2,048.76 crore; a rise of 33.0 per cent.
Operating Profit crossed the landmark level of Rs 4000 crore to reach
Rs 4,006.24 crore as compared to Rs 3617.40 crore in the previous year.
Cost to income ratio of 46.8 per cent; an improvement of 109 basis
points (bps).
Net Interest margin stood at 3.58 percent.
Return on Assets rose by 12 bps to 1.15 percent.
CRAR improved to 12.96 percent as at the end of March 2008, compared to
12.29 percent last year. This CRAR was achieved even after providing
for additional capital towards (i) compliance with revised AS-15 (
relating to accounting for retirement benefits) ; (ii) compliance with
Basel II- the capital has also been provided for operational risk,
besides credit & market risks and (iii) starting the Bank’s subsidiary
at London, called PNBIL.
The Bank has successfully migrated to Basel II accord as at March 31,
2008. The CRAR, as per Basel II works out to 13.46 percent.
To shore up the capital base, the Bank raised Hybrid Perpetual Tier-I
bonds (Rs 1,100 crore) and Upper Tier II bonds (Rs 1,610 crore) during
the year 2007-08.
Ratio of Gross NPAs to Gross advances was 2.74 per cent; showing an
improvement of 71 bps over the previous year.
Ratio of net NPAs to net advances stood at 0.64 per cent; an
improvement of 12 bps over the previous year.
NPA Coverage ratio stood at 77.3 percent as at the end of March 2008.
Return on Equity of 19 percent; an improvement of 381 bps over the
previous year.
2. Significant Balance Sheet Strength
Capital and Reserves increased to Rs 12,318 crore; an increase of 18.0
per cent.
Total business stood at Rs 2,85,959 crore; registering an increase of
20.9 per cent.
Deposits amounted to Rs 1,66,457 crore; showing a growth of 19.0 per
cent.
Low cost deposits comprising savings and current deposits formed 42.99
per cent of total deposits.
Advances grew by 23.7 per cent to Rs 1,19,502 crore.
Retail Advances (excluding traders) rose by 18.5 percent to Rs 18,834
crore.
Priority Sector Credit at Rs 43,412 crore was 44.11 percentage of
Adjusted Net Bank Credit (ANBC) and continues to be above the national
goal of 40 per cent.
Agricultural credit at Rs 19,947 crore was 18.94 percent of ANBC and
continues to be higher than the national goal of 18 percent.
3. Income & Expenditure Analysis
Total income of the Bank increased by 25.4 percent to reach a level of
Rs 16,262 crore.
Interest Income rose by 27.0 percent to Rs 14,265 crore.
Net Interest Income increased by 6.2 per cent to Rs 5,534 crore.
Non-Interest income grew by 15.4 percent to Rs 1,997 crore, accounting
for 12.3 percent of total income of the Bank. Commission, Exchange and
Brokerage (CEB) increased to Rs 1,106 crore, registering a growth of 14
percent.
Operating expenses stood at Rs 3,525 crore during 2007- 08, showing an
increase of 6 percent.
Interest Spread stood at 3.11 percent during 2007-08.
Income Expenditure Details
(Rs crore)
Particulars 2006-07 2007-08
Interest income 11236 14265
Interest/discount on advances/bills 7644 10439
Income on investments 3288 3611
Non-interest income 1730 1997
Total Income 12966 16262
Interest expended 6023 8731
Interest paid on deposits 5617 8265
Other interest expenses 406 466
Total Operating expenses 3326 3525
Establishment expenses 2352 2462
Total Expenses 9349 12256
Operating profit 3617 4006
Provisions and contingencies 2077 1957
Net profit 1540 2049
4. Profit Analysis
* Operating profit of the Bank crossed the landmark level of Rs 4000
crore to reach Rs 4,006 crore.
* Provisions were made at Rs 1,957 crore, as compared to Rs 2,077 crore
made during the last year.
* Net profit grew by 33 percent to Rs 2,049 crore.
5. Key Ratios (per cent)
Particulars 2006-07 2007-08
Average cost of funds 4.01 4.90
Average yield on funds 7.48 8.01
Return on net worth 15.19 19.00
Net Interest Margin 3.85 3.58
Return on assets 1.03 1.15
Staff expenses to average Working Funds 1.57 1.38
Operating profit to Working Funds 2.41 2.25
Earning per share (Rs) 48.84 64.98
6. Dividend
The Board of Directors has recommended a dividend of 130 percent for
2007-08.
7. Changes in Board of Directors
During the year 2007-08, the following changes took place in the
composition of Board of Directors.
Dr. K.C. Chakrabarty took over as Chairman & Managing Director on
4.6.2007.
Shri J.M. Garg was appointed Executive Director of the Bank on
6.6.2007, thereby increasing the strength of Executive Directors to
two.
Shri Mushtaq A. Antulay and Shri Gautam P. Khandelwal were nominated as
Directors on the Board of the Bank on 27.2.2008 under Section 9(3)(h)
of the Banking Companies (Acquisition and Transfer of Undertaking) Act,
1970.
Shri S.C. Gupta ceased to be Chairman & Managing Director w.e.f.
1.6.2007 on attaining the age of superannuation.
Shri Mohanjit Singh, Director representing shareholders expired on
21.2.2008.
The Board welcomes all the new Directors and wishes to place on record
the valuable services rendered by Shri S.C. Gupta and Shri Mohanjit
Singh.
8. Corporate Governance
The Bank gives high priority to good Corporate Governance. The Bank
was assigned the CGR-2 Rating by ICRA Ltd implying adoption of such
practices, conventions and codes as would provide its financial
stakeholders a high level of Corporate Governance.
In compliance of RBI directive regarding “fit & proper criteria” to be
fulfilled by the person being elected as Directors on the Boards of the
Nationalised Bank, the Board of the Bank constituted a “Nomination
Committee”.
The Bank has complied with the guidelines of RBI and SEBI on the
matters relating to Corporate Governance which has been examined by the
Statutory Central Auditors.
In recognition of its efforts, the Bank was bestowed Golden Peacock
Award for Excellence in Corporate Governance by the Institute of
Directors, on September 20, 2007.
9. Organisational Restructuring
While the Bank gained in terms of improved business processes, asset
liability management and risk management, the rapid changes in the
competitive environment and higher use of technology warranted the need
for a more horizontal organizational structure for speedier decision
making. Keeping this in view, the Bank removed one tier and adopted 3
tier structure in place of existing 4 tier one. The new 3 tier
structure will allow for a leaner, efficient and cost effective system.
10. Acknowledgments
The Board of Directors thank the Government of India, Reserve Bank of
India, Securities and Exchange Board of India (SEBI), Stock Exchanges,
the Bank’s customers, public in general and the shareholders for
valuable support, continued patronage and confidence reposed in the
Bank. The Board also wishes to place on record its appreciation to all
our people whose talent and commitment are central to the Bank’s
success and look forward to their continued co-operation in meeting the
future challenges.
For and on behalf of the Board of Director
Chairman and Managing Director
New Delhi
May 29, 2008
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