PNB reports biggest quarterly losses in banking history

Mumbai, May 18 : Public sector lender Punjab National Bank (PNB) on Wednesday posted massive net loss of Rs.5,367.14 crore for the fourth quarter ended March 2016 caused by provisioning for bad loans.

This is the highest quarterly loss reported by any bank in India, as non-performing assets or bad loans soared.

Banks have been forced by the Reserve Bank of India to provide higher amounts for the bad loans, thus ensuring that the red ink spreads across their balance sheets.

The bank had posted net profit of Rs.306.56 crore in the corresponding period of 2014-15, according to regulatory filing.

The bank reported its bad loans at Rs.55,818 crore compared to Rs.34,338 crore in the previous quarter. As percentage of total loans, the non-performing assets amounted to 12.9.

"This is by far the highest ever increase in NPA (non-performing asset) recorded by any bank," Siddharth Purohit, senior equity research analyst -- banking, Angel Broking told IANS.

"It is the much higher provisioning that PNB allotted in the fourth quarter to balance the high NPAs that led to such a massive loss," he said.

The bank reported provisions (other than tax) and contingencies at Rs.10,485 crore in the fourth quarter of 2015-16. The amount of net NPAs were at Rs.35,422 crore as on March 31, 2016.

"The bank intentionally took much higher provisions for cleaning up of the balance sheet. Naturally they had to take provisions for the high NPAs as they had not accounted for the asset quality review in Q3 of the previous fiscal," Purohit said.

Reserve Bank of India had given a deadline for all banks to complete their asset quality review by March 31, 2016.

In this connection, the government said last week that banks' gross non-performing assets (GNPAs) could rise to 6.9 percent by March 2017, the deadline given by Reserve Bank of India (RBI) Governor Raghuram Rajan for banks' balance sheet clean-up,

"If the macroeconomic conditions deteriorate, the GNPA ratio may increase further, and it could rise to around 6.9 percent by March 2017 under a severe stress scenario," the finance ministry said in its annual report 2015-16.

Although PNB has not disclosed the NPAs sector-wise, Angel Broking believes it is metal and commodity sector that is responsible for the bank's high NPAs.

"PNB has come out with numbers much lower than our and street's expectations. The point of worry is that the bank believes the cleaning up exercise of balance sheet is not over. We believe pain to continue in FY17 also, with regards to asset quality," he said.

"Going ahead certainly this kind of loss will not be there for the bank. Though asset quality has still not stabilised, the last part is done," he added.

The total income of PNB has decreased to Rs.13,276.19 crore for the quarter ended March 31, 2016 from Rs.13,455.65 crore in the quarter ended March 31, 2015, the BSE filing said.

For the entire fiscal 2015-16, the bank has posted a net loss of Rs.3,974.39 crore for the year ended March 31, 2016 as compared to net profit of Rs.3,061.58 crore for the year ended March 31, 2015, PNB said.

Total income for 2015-16 has increased to Rs.54,301.37 crore from Rs.52,206.09 crore for the year ended March 31, 2015.

PNB posted a consolidated net loss of Rs.3,689.77 crore for the year ended March 31, 2016 as compared to net profit of Rs.3,399.60 crore for the year ended March 31, 2015, it said.

PNB stock closed on Wednesday at Rs.76.20 a share, up 2.40 points, or 3.25 percent, over its previous close on the BSE.