Punjab National Bank has reported a net loss of Rs 13,416.91 crore for the fourth quarter ending March 2018.
The bottomline was dragged by a three-fold surge in provisions towards bad loans, which was taken upfront during the quarter.
In the same quarter a year ago, the bank had turned around due to write-back in pension provisions to report a profit of Rs 261.9 crore as against a massive loss of Rs 5,367.1 crore in March-end quarter 2016.
Total hit to PNB on account of the Nirav Modi-scam is Rs 14,356.84 crore. This includes unauthorised letters of undertaking and domestic loan.
Due to high provisions, the capital adequacy ratio (CAR) dipped to 9.2 percent, below the minimum of 11.5 percent laid down by Basel-III norms.
The core equity tier-1 ratio of 5.96 percent, just above the regulatory minimum of 5.5 percent.
Asset quality
Since February 14, the Delhi-based bank has been at the centre of a near Rs 13,000 crore fraud involving diamond merchants Nirav Modi and Mehul Choksi.
In the fourth quarter, PNB's provisions close to trebled to Rs 16,202 crore, from Rs 5,753.3 crore in March quarter 2017, due to the fraud, and a Reserve Bank of India circular.
A Reuters poll had estimated the fraud-affected lender to report a loss of Rs 3,908.6 crore during the January to March period. Provisions were expected to double to Rs 10,080.9 crore.
Gross non-performing assets (NPAs) worsened substantially to 18.38 percent of total loans as on March-end 2018 as compared to 12.11 percent of total loans in December 2017 and 12.5 percent as on March-end 2017.
Net NPA ratio also deteriorated to 11.24 percent from 7.55 percent in the previous quarter and 7.81 percent in the year-ago period.
In absolute terms, gross NPAs jumped significantly to Rs 86,620 crore, up from Rs 57,519 crore in the December quarter.
Net NPAs were at Rs 48,684 crore as on March end 2018, up from Rs 34,075 crore in December.
Net interest income and Other income
NII or Net interest income (the difference between interest earned and expended) was down by 16.8 percent to 3,063.3 crore, as against Rs 3,683.5 crore in the same quarter a year ago.
The NII was projected to rise seven percent at Rs 3,939.7 crore, as per Reuters poll.
Non-interest income or other income halved to Rs 1,561 crore versus Rs 3,102.80 crore in March quarter ending 2017. The poll estimated the other income to decline by 23.7 percent to Rs 2,367.3 crore from Rs 3,102.80 crore.
Full year financial results
For the full year ending March 2018, PNB’s net loss stood at Rs 12,130 crore as against a net profit of Rs 1187 crore in FY17.
The results were announced just before market closing. It has touched a 52-week low of Rs 83.80 apiece after the results announcement.
At 15:40 hrs, Punjab National Bank stock was quoting at Rs 86.00 per share, down Rs 3.40, or 3.80 percent as compared to 0.04 percent fall in BSE Sensex.
Details of Nirav Modi-fraud accounting
The total amount involved in the fraud now stands at Rs 14,347 crore, the bank said.
This includes credit given out against Letters of Undertaking (LoUs) and amounts under other credit facilities given to entities related to the Nirav Modi group.
The bank has made provisions of Rs 7,178 crore—amounting to 50 percent of the fraud amount. The remaining half would be provided for over three quarters.
Liabilities worth Rs 6,586.1 crore were paid by the bank on account of LoUs that matured as of March 31, 2018.
The bank created liabilities worth Rs 6,959.8 crore for LoUs that come due after March 31, 2018.
Other provisions
The bank set aside Rs 20,353 crore as provisions compared to Rs 4,467 crore in the third quarter ending December 2017.
The bank said that provisions worth Rs 3,120 crore have been made against accounts where stressed asset schemes were under implementation. The RBI, in a February circular, had withdrawn existing stressed asset schemes and asked banks to re-classify these accounts as bad loans if the implementation of these schemes was not yet complete.
On account of volatility in bond prices, the bank made a provision of Rs 741 crore but it chose to defer provisions of Rs 1,088 crore to subsequent quarters, as permitted by RBI.
Divergence in NPAs
PNB also reported divergences in classification of NPAs in comparison to RBI's assessment. For FY17, gross NPA divergence stood at Rs 2,207 crore, and net NPA divergence came in at Rs 1,414.9 crore.
Divergence refers to the difference between the classification of assets by the bank and the RBI's assessment.
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