PNB expects 8-10% credit growth and 10-12% operating profit growth in H2: CEO
Our endeavour will be to bring net NPA below 6% by March 2020.
Punjab National Bank has made a small profit in Q2. What is your view on the bank’s performance?
The first thing is that whether it is small or big, profit is a profit. Second point is in the current state of certain accounts coming under stress. Just when we thought that large corporate segment NPA identification has been completed, we started getting stress from other segments like NBFCs.. So the requirement is adequately provided for in the balance sheet, so that we are able to strengthen that to look at any setbacks which are coming.
Coming back to the results, for the quarter ended September, we have declared Rs 500 crore profit. There has been a provision of around Rs 3,000 crore which we have done and there are fraud related accounts, where also, we have made provision by taking the dispensation.
Our approach in the current financial year will be that even if we are able to earn well in terms of operating profit and net interest income, we would like to strengthen the balance sheet by booking profit in a reasonable way and see that 2021 onwards, the balance sheet is much stronger.
Our operating profit has grown by 25%. Even the net interest income has grown better, but still we have controlled booking the profit so that provisions are taken properly, helping us strengthen the balance sheet.
The net NPA is also higher than the RBI norm. How are you planning to tackle that?
Net NPA currently stands at 7.6% odd which sequentially, it has increased by marginal points from 7.17%. The partial reason is that our advances outstanding has come down. So, the numerator value has come down and that is the reason why percentage is overly projected. Even in value, there was a marginal increase. Now with respect to what we would be handling in the second half (H2) or in the next two quarters, we are very confident with respect to recovery.
Once we get the recovery not only in smaller accounts but also in NCLT accounts, we will be working towards reduction in net NPA. Our endeavour will be to bring it below 6% by March 2020.
What is your overall outlook for the second half of this financial year?
We are looking at a credit growth of 8-10% and operating profit growth of 10-12%. Our ROA will hover around 0.40. Currently, it is around 0.37 for the half year. Credit cost should be anything around 2 to 2.5. These are all the ballpark figures that can be taken for guidance of the residual part of the current financial year, which also includes around Rs 19,000 crore slippage for the entire year.
Currently, Rs 12,000-crore slippage has happened and at the same time, even though there was a recovery of only Rs 7,000 crore, we are looking at Rs 24,000 crore recovery because we are expecting around Rs 11,000 crore from NCLT segment in the residual part of the current financial year.
All this after factoring in the economic slowdown and weak demand?
Definitely. Our retail growth has been very pronounced. At around 18% to 20%, it is a wonderful growth and we are looking at the mid corporate segment. There are various limits which we had given but as on today, they are under unutilised status. We are expecting them to be utilised during the second half of the year.
What is the progress on the mergers? When can we expect it to get through?
Merger has three dimensions. One is that already every bank board of all the 10 banks have submitted their consent for the mergers to the Government of India. Now the government is taking a certain course of action by talking to RBI and coming out with the notification to indicate the effective debt.
From the banks’ perspective, the three banks together have found 34 committees to cover all critical important business areas as well as the operational and working areas. They are meeting at regular intervals and sorting out the problems. When I say sorting out the problem, it is a matter of converging towards having a pre-migration activity properly defined and by the time the date comes, all the requirements which need to be done will be done before we become one entity.