Punjab National Bank (PNB) expects its net profit for the current fiscal to be around ₹ 4,000-6,000 crore, S.S.Mallikarjuna Rao, Managing Director & CEO, said on Tuesday. This guidance is significant as the bank had closed fiscal 2020-21 with a net profit of ₹ 2,022 crore.
Rao said that he expects over 50 per cent of this guided net profit for 2021-22 to be contributed by write-back of provisions made on NPAs (bank has over 80 per cent provision coverage ratio).
The bottomline will also be bolstered by cost optimisation and branch rationalisation exercise the bank will continue to undertake this fiscal. PNB, which had rationalised (merged) over 380 branches in Q1, is looking to rationalise about 1000 branches by March end this fiscal and go in for setting up new smaller sized branches that are more digitally driven and expand in regions like South and Western India where PNB is not that strong in terms of branch distribution and needs to be strengthened, Rao said at a virtual press conference post the declaration of Q1 results of the bank.
This rationalisation is expected to give huge reduction in operational expenditure for PNB and thereby gain synergies out of the three-way amalgamation with United Bank of India and Oriental Bank of Commerce that comes into force from April 1 next year, he said.
75% hike in profit
PNB on Monday evening reported a 75 per cent increase in standalone net profit for the first quarter ended June 30 at ₹1,023.46 crore as against net profit of ₹586.33 crore in the March quarter. On a year-on-year basis, net profit grew 232 per cent when compared to net profit of ₹ 308.45 crore net profit recorded in the June quarter last year.
Going forward, Rao said that PNB expects to make cash recovery of ₹5,000 crore from NCLT itself this fiscal and reduce debt of ₹12,000 crore. “Apart from that, we get normal recovery ₹ 3,000 crore every quarter as normal recovery. So I am expecting cash recovery of ₹14,000 crore and much higher debt reduction of ₹ 20,000- 22,000 crore”, he said.
Also read: PNB Q1 net up 75% sequentially to ₹1,023 crore
For the quarter under review, PNB made recoveries of about ₹8,000 crore including realisation of ₹1,000 crore from the grounded Kingfisher Airlines.
Rao said that he expects credit growth to pick up from second quarter. The credit growth is expected to improve in the next three quarters compared to what has been so far this year and the bank expects overall credit growth to be 8-10 per cent this fiscal. PNB is looking to bring down its net NPA below 5 per cent by end March 2022.
Valuation controversy
Asked on the recent valuation controversy on PNB Housing Finance, a company in which PNB holds about 32 per cent stake, Rao said that he would wait for the Securities Appellate Tribunal (SAT) to come out with its order and then on the basis of that order the housing finance lender as well as PNB will look at various options. “This issue is a matter of interpretation of law. This can be put to conclusion decisively only by judiciary, non-judiciary and regulator. We are awaiting judgement of SAT and we are bound to follow the judgement given by SAT. I do not want to presuppose what kind of order will come and we will take a call only after the SAT order comes. We will go by the SAT order both in letter and spirit”, Rao said.
He made it clear that PNB had not asked PNB Housing to reconsider the Carlyle deal, but only asked the housing finance lender to follow the directions specified in SEBI’s letter to PNB Housing. “ It’s not a question of going diametrically opposite of what has been done in the deal. We (PNB) have only told them (PNB Housing) that SEBI’s communication to PNB Housing may be looked into in terms of reconstruction of the entire process. This is now in the domain of SAT and we will wait for the SAT order”, he said.