Punjab National Bank (PNB) said it is on track to achieve a net profit of  Rs 4,000 crore for the current fiscal, riding on the back of an improving credit demand both from industry and state entities. 

The second-largest state-owned bank is expecting to clock a credit growth of  6% to 8% as infrastructure spending from the government picks steam and private sector investment climate improves. This has also given confidence to the bank to guide for higher credit growth of 8-10 % for 2022-23. 

The bank is expecting recoveries of  Rs 5,000 crore in the January-March quarter, which is set to bring down its net non-performing assets (NPAs) to below 4.5% from the current 4.9%. Gross NPAs is also expected to fall below 12% from 12.88% reported in the December quarter.

“We are properly in line with the guidance given to you last July that profit for the full fiscal would be more than Rs 4,000 crore, Punjab National Bank managing director and CEO S S Mallikarjuna Rao said. 

In July 2021, PNB top management guided profits of Rs 4,000-5,000 crore in FY22. Even in 2020-21, PNB had met its profit guidance of over Rs 2,000 crore, Rao told reporters.

“We expect robust recoveries of about Rs 5,000 crore in the January-March quarter from the cases that are being resolved through the National Company Law Tribunal (NCLT) and from small accounts. While Rs 1,000 crore is expected to come from the NCLT cases, Rs 2,300 crore would be recovered from non-NCLT cases,” Rao said. In small accounts, the bank is expecting a recovery of  Rs 2,000 crore, taking the overall recovery to Rs 5,000 crore in the quarter ended March. 

In the first nine months of the current fiscal, the bank has recovered Rs17,500 crore, Rao added.

The   bank recovered its entire dues of  Rs 4,000 crore from Air India by the end of the third quarter ended December 31, 2021. 

“We expect much better credit growth in the corporate level in 2022-23 as private investment improves. The budget last year had given impetus to infrastructure and this will lead to good traction in 2022-23. Credit growth will drive the bank’s business profitability. We are seeing good traction for credit growth not only in PNB but across the banking industry because of the improvement in private sector investments,” Rao, who will superannuate on January 31, said.

 PNB is expecting the asset quality to further improve in the March quarter. “We do not have many accounts in the corporate segment in the March quarter which would become NPA. It is only a matter of controlling collections and asset quality in terms of the RAM (retail, agriculture & MSME) segment, which we are confident during the next financial year,” Rao said.

PNB reported a two-fold jump in standalone net profit to Rs 1,126.78 crore in the fiscal ended December, as bad loans declined marginally. The lender had reported a net profit of Rs 506.03 crore in the year-ago period. 

The bank management has guided the net interest margin (NIM) to be at 2.75-2.8% in FY22. The lender reported a global NIM of 2.93 % in the December quarter, up from 2.39 % a quarter ago. Domestic NIM was at 2.75 % for the quarter ended December.

Rao said PNB will continue to sell its non-core assets, both on the real estate front as well as some equity investments in associates and subsidiaries. “There is no change in our approach in the last one-and-half years. We have been pursuing liquidation of our non-core assets.”

PNB is looking to further monetise its 15% stake in UTI Asset Management Company as part of its non-core asset sale plan to shore up its capital base. The bank had sold 3% stake in UTI AMC in October 2020, and booked a profit of Rs 160 crore, Rao said.

Plans are also afoot to divest stake in Canara HSBC OBC Life Insurance Co Ltd, an associate of the bank, within the regulatory guidelines to monetise it, he added.

The lender is looking to divest its stake in asset reconstruction companies during 2022-23. The bank has monetised real estate assets, including one of the floors in Bhikaji Cama Place at Delhi.

Meanwhile, PNB reported operating profit (before contingencies and provisions) of Rs 5,076.31 crore in the fiscal third quarter ended December, down 17.24% a year ago.

Total income during October-December 2021 declined to Rs 22,026.02 crore as against Rs 23,298.53 crore a year ago.

The company provided Rs 3,353.55 crore for the December quarter, down from Rs 5,175.99 crore a year ago. However, provisions for bad loans increased by Rs 536 crore.

Operating margin was at 23.05% compared to 18.91% a quarter ago and 26.62% a year ago.

On the asset quality front, the bank cut its gross NPAs as a percentage of gross advances to 12.88% in the December quarter, from 12.99% in the year-ago quarter. Net NPA stood at 4.9% from 5.49% a quarter ago and 4.03%  a year ago.