Punjab National Bank (PNB) has come a long way from the days of the Nirav Modi scam to reporting its highest-ever quarter profit of Rs 3,252 crore under the stewardship of managing director and CEO Atul Kumar Goel.

Goel took charge of the country’s second-largest public sector bank on 1 February 2022, four years after the fugitive diamantaire’s Rs 14,000-crore scam was unearthed. He started addressing the bad loan issue, focused on recoveries, targeted higher credit growth and mobilised deposits.

The reward has been coming. For the full-fiscal ended 31 March 2024, PNB reported a whopping 229% rise in net profit to Rs 8,244.62 crore, from Rs 2,507.2 crore a year ago. 

Goel has kept the momentum going in the current financial year. The bank has posted a 159% rise in net profit for the fiscal first quarter ended 30 June from Rs 1,255.4 crore in the year-ago period, while the asset quality has improved significantly and deposits and credit have both seen a good run. 

“This is the highest profit in the history of the bank. We have fired on all cylinders, be it asset quality, recoveries or growth in the loan book and deposits,” said a jubilant Goel. 

Loan book

The state-run bank expects to clock a 12% growth in its loan book in FY25.

“We have a sanction pipeline of Rs 1 lakh crore. This gives us the confidence of being able to grow our loan book by 12% in FY25,” Goel said. 

Keeping in line with this target, the bank’s overall advances grew 12.2% year-on-year to Rs 10.28 lakh crore as on 30 June 2024. The domestic loan book grew 11.6% to Rs 9.84 lakh crore. 

With continued focus on the RAM (retail, agriculture and MSME) sector, the bank’s retail loan segment grew 14.4% year-on-year to Rs 2.35 lakh crore in the June 2024 quarter. Within this, housing loans were up 14.7% to Rs 1.02 lakh crore and vehicle credit by 26.9% to Rs 21,726 crore. Personal loan grew 9.1% to Rs 22,378 crore.

While agriculture loans grew by 15.8% to Rs 1.69 lakh crore, MSME advances increased by 7.9% to Rs 1.43 lakh crore. 

The RAM sector as a whole grew 13% to Rs 5.46 lakh crore. It has a share of 55.5% of the lender’s advances, up from 54.7% a year ago, while corporate loans account for the remaining 44.5%.

Corporate loans of the bank grew 9.8% over the year-ago period to Rs 4.38 lakh crore.

Deposit growth

Goel admits that matching deposit to credit growth is a challenge in the current market situation but says there is a plan to raise capital of Rs 5,000 crore in the second quarter of the current financial year.

The bank had earlier guided for a 10% growth in deposits for FY25.

In the fiscal first quarter ended June, the bank’s overall deposits rose 8.5% to Rs 14.08 lakh crore.  Out of this, domestic deposits grew 8.1% to Rs 13.7 lakh crore. 

“We have Rs 70,000 crore of excess SLR (statutory liquidity ratio) so whatever new deposits we raise can be fully deployed to grow credit. We have 20 crore customers and 10,150 branches so raising deposits is not a big issue. In fact, we have lowered the rates on our deposits last week,” Goel said.

The low-cost CASA (current account savings account) deposits grew 3.4% year-on-year to Rs 5.5 lakh crore. Retail term deposits (less than Rs 3 crore) grew 9.2% to Rs 5.86 lakh crore as on 30 June 2024. Total term deposits rose 12% year-on-year to Rs 8.59 lakh crore.

The domestic CASA ratio, however, fell to 40.1% from 41.90% a year ago.

“Growing CASA is a challenge for all banks. We are planning to raise Rs 5,000 crore through qualified institutional placement (QIP) in the second quarter of FY25,” Goel said.

The bank's credit-to-deposit (CD) ratio improved to 73.05% in the June quarter, from 70.64% a year ago and 71.79% in the preceding March 2024 quarter. 

On the Reserve Bank of India’s (RBI) draft circular on banks’ liquidity coverage ratio (LCR) standards, Goel said it will have 10% impact on PNB’s LCR, which stood at 125% as on Q1FY25.

Asset quality

Asset quality and recovery is another area of pride for Goel. Continuing the downward trend, the bank’s gross net performing assets (NPAs) in the June quarter improved by 275 basis points and net NPA by 138 basis points over the year-ago period.

The gross bad loans of the bank came down to 4.98% of total advances as of June 2024, from 7.73% a year ago. The gross non-performing assets (NPA) stood at Rs 51,263 crore, showing improvement from Rs 70,899 crore a year ago and Rs 56,343 crore in the preceding March quarter. 

The net NPA ratio also fell to 0.60% from 1.98% in June 2023.

Total recovery during the June quarter was Rs 3,249 crore. “We have set a recovery target of Rs 18,000 crore for the current financial year,” Goel said.

The bank is looking at a recovery of Rs 3,000 crore from its cases in the National Company Law Tribunal (NCLT).

“We recovered Rs 200 crore from NCLT in Q1. We are expecting to recover Rs 1,210 crore in Q2, Rs 990 crore in Q3, and Rs 590 crore in Q4. Overall, we expect to recover Rs 3,000 crore,” Goel said, adding that the bank has 224 cases in process under the insolvency route for recovery.

The slippage ratio improved by 43 basis points to 0.76%. 

Credit cost was lower at 0.32% in the June quarter, compared to 1.99% a year ago.

PNB has revised its FY25 guidance for the gross NPA ratio to 4% from 5% earlier. The lender also cut its credit cost guidance to below 0.5% from below 1% earlier, based on higher recoveries and lower fresh slippages. 

NII and NIM

The state-run bank’s net interest income (NII) also bulged, pushing up its net profit. NII, which is the difference between interest earned and paid, climbed 10.2% to Rs 10,476.2 crore in the June quarter compared to Rs 9,504.3 crore in the year-ago period. 

The global and domestic net interest margins (NIM) of the bank stood at nearly 3%.

Interest income rose to Rs 28,556 crore from Rs 25,145 crore in the same quarter a year ago. Total income increased to Rs 32,166 crore from Rs 28,579 crore.

Provisions

Provisions for bad loans fell sharply to Rs 792 crore in the June quarter, compared to Rs 4,374 crore a year ago.

The provision coverage ratio (PCR), including technical write-offs (Two), increased by 607 basis points to 95.90%. The ratio excluding Two improved by 1,259 basis points to 88.43%. 

Operating profit

PNB’s operating profit for the quarter ended June stood at Rs 6,581 crore, up 10.27% from the year-ago period. 

The bank's global business grew 10.03% to Rs 24,36,929 crore from Rs 22,14,741 crore in June 2023.

Capital adequacy 

Capital adequacy ratio stood at 15.79% at the end of June 2024, compared to 15.54% a year ago. 

The bank plans to raise Rs 10,000 crore via tier-I and tier-II bonds at an ‘opportune time’, Goel said.

Punjab National Bank is spending over Rs 2,500 crore on cyber security measures as part of its initiative to usher in safe banking practices.