Punjab National Bank (PNB) is looking to recover Rs 14,000 crore from bad loans during the three quarters and earn a profit of Rs 4,000-6,000 crore this fiscal.
As a step to control expenditure, the state-owned bank is planning to shut down 1,000 branches. “We have succeeded in rationalising more than 500 branches. We are expecting to rationalise 1,000 branches by March 2022, which will give huge amount of reduction in the operational expenditure," said PNB managing director and CEO SS Mallikarjuna Rao.
PNB currently has about 10,641 branches across the country.
The bank expects to recover bad loans worth Rs 5,000-5,200 crore from the cases in the National Company Law Tribunal (NCLT) by March 2022, Rao said. This will help cut non-performing assets (NPAs) by about Rs 12,000 crore.
"In normal recovery we generally get around Rs 3,000 crore per quarter. So, another Rs 9,000-10,000 crore we are expecting in normal recovery," he said.
Aided by strong recovery and cost rationalisation, Rao said the bank should be able to earn profit between Rs 4,000 crore and Rs 6,000 crore in FY22.
The bank has been able to improve its net margin as interest rates on deposits have fallen. "Guidance for 2021-22 would be Rs 4,000-6,000 crore...at the balance sheet level the cost of deposits have been reduced drastically, cost to income ratio has been reduced, yield on advances has come down," Rao said.
Recoveries from NPAs where provision coverage ratio is 80%, these will be write back, he said. "So 50% of profit will be contributed by the write back during the year. So profit would come from mix of cost rationalisation and write back," he added.
On capital raising, he said: “If you look at the capital adequacy ratio, it is 15.19 which is adequate to take care of 8-10% credit growth. However, PNB, being a big bank, in order to insulate itself from the capital requirement for future and not to depend on the government, we will definitely look at discussing about it one month or so and take a call on that," he said. This exercise would be with a view to generating buffers not for meeting business requirement, he added.
Rao said PNB will divest its stake in Canara HSBC OBC Life Insurance Company in the next 12 months. The bank had acquired a stake in the life insurer post amalgamation of the erstwhile Oriental Bank of Commerce (OBC) into itself last fiscal year. The erstwhile OBC held 23% stake in the life insurer, which by virtue of amalgamation has come to PNB.
Canara Bank owns 51% stake, while HSBC Insurance (Asia Pacific) Holdings Ltd as a foreign partner owns 26%. It is also a promoter of another insurer PNB Metlife Insurance, owning the highest stake of 30%.
The company was set up in 2001, in which other shareholders include US-based Metlife with 26%, Elpro (21%) and M Pallonji & Company (18%). As per extant insurance guidelines of Insurance Regulatory and Development Authority of India (Irdai), one promoter cannot hold more than 10% stake in two insurance ventures.
Rao expects credit growth to revive in the coming months. In the worst case scenario, the bank may see a 6-8% loan growth for FY22, he said in an earnings call on Tuesday. A strong pick-up in private capital investment may lift it to even 8-10%, he added.
