19 May 2016 Current Affairs: State-run Punjab National Bank has posted the largest quarterly loss ever reported by an Indian lender after being forced to set aside more funds as bad loans more than doubled from the year earlier.
The Delhi-based lender made a net loss of Rs 5,367 crore in the January-March quarter compared with a profit of Rs 307 crore in the year earlier. Provisions shot up to Rs 11,380 crore from Rs 3,281 crore following a surge in gross non-performing assets (NPAs) to Rs 55,818 crore fromRs 25,695 crore at the end of March 2015.
India's banks are being forced to clean up their books under an asset quality review (AQR) initiated by the Reserve Bank of India (RBI). Five other state-run lenders have also reported steep losses in the just-concluded fourth quarter of FY16.
The bank reported fresh slippages - loans turning bad - of Rs 41,060 crore for the year ended March. Gross NPAs for PNB rose significantly to 12.9 per cent at the end of March 2016, from 6.55 per cent a year ago. Net NPAs also surged to 8.61 per cent against 4.06 per cent at March 2015.
In a research note, Angel Broking said that this was by far the highest ever increase in NPAs at any bank so far. "The point of worry is that the bank believes the cleaning up exercise of balance sheet is not over.
PNB hopes to recover Rs 15,000-20,000 crore of loans gone bad over the next year. The bank is also looking to unlock the value of its non-core assets to raise capital but the timing of the sale will depend on market conditions.
Nitin Kumar, research analyst at Prabhudas Lilladher, said provisioning will continue, which may further impact financials. "The bank's scrip may have not been impacted for now because may be the market is under impression that the bank may have come out with all its bad loans .
For FY16, the bank reported a net loss of Rs 3,974 crore against a profit of Rs 3,062 crore in the previous year. The bank has set aside Rs 18,469 crore for the FY16 to cover bad loans.