Net delinquencies were almost cut in half, to 4.04%, from 8.03% the previous year. (File image)
After eight quarters of losses, the state-run Punjab & Sind Bank turned the corner in the January-March period with a net profit of Rs 161 crore, helped by a healthy recovery. The lender had recorded a net loss of Rs 236 million in the same quarter of fiscal year 20.
For the full year (FY21), the bank incurred a net loss of Rs 2,733 cr, compared to Rs 991 cr in FY20 (pre-pandemic period). The bank’s gross non-performing assets decreased to 13.76% of its advances as of March 31, 2021 from 14.18% a year ago.
Net delinquencies were almost cut in half, to 4.04%, from 8.03% the previous year.
However, sequentially, while NPAs grew by 13.14% as of December 2020, net NPAs also increased by 2.84%. But the increase in gross bad loans was a consequence of the Supreme Court recently overturning an earlier order that had ordered lenders not to classify an account (until a new order) as an NPA if not until August 31, 2020. Previous months NPAs were to be reported as part of March quarter financials.
Having provided 83% of its bad loans, the bank now expects to post a profit in each quarter of this fiscal year, Managing Director and Chief Executive Officer S Krishnan said, noting that the worst is over for the bank. Its provision coverage ratio (PCR) improved significantly over the past year from almost 67% in March 2020.
The capital-to-risk (weighted) asset ratio also jumped to 17.06% in March 2021 from 12.76% a year earlier, thanks to the government infusion of up to Rs 5.5 billion. The CASA level (checking account, savings account), which reflects the bank’s ability to obtain low-cost funds, increased by almost 19% over the previous year. However, the net interest margin fell to 1.7% in the March quarter from 1.87% a year earlier.
Krishnan said the cost of the compound interest waiver for all borrowers who took advantage of a loan moratorium in the wake of the pandemic (in line with a recent Supreme Court directive) could be around Rs 30 million for their Bank. When asked if the lender is urging the government to compensate him for this exemption, he said that the Indian Banking Association was taking up the matter on behalf of all banks with the Center.
Refuting the speculation, Krishnan said he has not received any communication from the central bank expressing concern about the non-interest-paying securities (to the tune of Rs.5.5 billion) that the government used at the end of last fiscal year to recapitalize Punjab & Sind Bank.
Punjab & Sind Bank, Krishnan said, will not contribute to the capital 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 you.
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