Consolidation complete; will return to growth strategy: PNB

Q: I will start with talking about your profitability, which has definitely disappointed the street. Your provisions have risen 77 percent on year on year basis. Can you just take us through what that entails because you did mention it was depreciation on investments as well as on asset quality and will this quarter be an aberration?

A: I would feel that this quarter has been aberration because we had all problems coming in one quarter for us, may be for the industry also in some way. We did a provision of Rs 2029 crore during this quarter compared to Rs 1467 crore of last quarter which is an increase of 38.3 percent and compared to last quarter we did Rs 1678 crore, that is again a 25 percent increase compared to last quarter.

Now if you look at the major portion Rs 434 crore has gone for standard assets including the restructured book which was minus 4 last year. That means an additional provision of Rs 438 crore for standard advances including restructured advances.

The deprecation in investment during this quarter is Rs 443 crore compared to a write back of Rs 14 crore last year. Now that has an impact of about Rs 460 crore. So these two have accounted for an additional provision of Rs 900 crore compared to last year, this has brought down my net profit from a flat operating profit level. And I am sure that this type of provisioning may not be required in the coming quarters.

Q: So you expect your profitability to recover in the coming quarters from the Rs 500 level to may be the earlier levels that you were clocking?

A: Yes it should improve to the earlier levels.

Q: You did talk about depreciation in investments, was this on account of the tightening that we saw in the quarter gone by and hence the yield spike? Can you take us through what that entailed?

A: After May 15 when the yields went up substantially there was a depreciation and we were permitted to transfer a portion of our investment books to the held to maturity (HTM) category, that transfer took about Rs 48 crore of loss to be provided by us.

Plus whatever is the deprecation in the book, one third of it we were permitted to write-off or provide for one third each. Out of the total depreciation of Rs 1067.80 crore, we provided for Rs 370.63 crore this quarter. But fortunately, the interest has moved positively after the half year-end and the impact of this deferment of the depreciation will come down in the next two quarters looking at the yield as of now I think the impact will come down in the next two quarters.

Q: You don’t expect the yields spiking back close to 9 percent to affect your treasury portfolio in the coming quarters or at least in this quarter?

A: I don't look at the yield to touch 9 percent, it is about 8.8 percent now, I definitely look it to be little lower than this at the end of the quarter.

Q: You did mention your slippages came in at Rs 2009 crore, can you just take us through the nature of the slippages this quarter and how it looked versus the comparable quarter?

A: The slippage during this quarter has not been concentrated in any particular industry or in any particular geography. This Rs 2379 crore is the net increase in the slippages, which constituted to Rs 2,009 crore in the fresh slippages and Rs 370 crore is the increase in the existing NPA book. There is no big account which constitutes a major portion of this. So it is a diversified NPA I would say.