Punjab & Sind Bank returns to profit after 8 quarters of losses

After eight quarters of losses, state-run Punjab & Sind Bank turned the corner in the January-March period with a net profit of Rs 161 crore, aided by healthy recovery. The lender had recorded a net loss of Rs 236 crore in the same quarter of FY20.

For the full year (FY21), the bank incurred a net loss of Rs 2,733 cr, compared with that of Rs 991 cr in FY20 (pre-pandemic period). The bank’s gross non-performing assets eased to 13.76% of its advances as of March 31, 2021 from 14.18% a year ago.

Net NPA almost halved to 4.04% from as much as 8.03% a year earlier.

However, sequentially, while GNPAs grew from 13.14% as of December 2020, net NPA, too, jumped from 2.84%. But the rise in gross bad loans was the fallout of the Supreme Court recently vacating an earlier order that had directed lenders not to classify an account (until further order) as NPA if it was not so until August 31, 2020. So, the accumulated NPAs in earlier months had to be declared as part of the March quarter financials.

Having provided for 83% of its bad loans, the bank now expects to post profit in each quarter of this fiscal, managing director and chief executive S Krishnan said, indicating the worst is over for the bank. Its provision coverage ratio (PCR) improved significantly over the past year from just about 67% in March 2020.

Capital-to-Risk (Weighted) Assets ratio, too, jumped to 17.06% in March 2021 from 12.76% a year earlier, thanks to the government’s infusion of as much as Rs 5,500 crore. CASA (current account, savings account) level, which reflects the bank’s ability to garner low-cost funds, jumped almost 19% from a year earlier. However, net interest margin dropped to 1.7% in the March quarter from 1.87% a year before.

Krishnan said the cost of the waiver of compound interest for all borrowers who availed of a loan moratorium in the wake of the pandemic (in sync with a recent Supreme Court directive) could be about Rs 30 crore for his bank. Asked if the lender is urging the government to compensate it for this waiver, he said the Indian Banks’ Association was taking up the matter on behalf of all banks with the Centre.

Refuting speculations, Krishnan said he hasn’t received any communication from the central bank expressing concern about non-interest paying securities (to the tune of Rs 5,500 crore) that the government used late last fiscal to recapitalise Punjab & Sind Bank.

Punjab & Sind Bank, Krishnan said, won’t contribute to the equity of the proposed “bad bank” (National Asset Reconstruction Company), which is expected to be operational in June. However, the bank will consider transferring certain bad loans to it.

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