Lower fund cost lifts PNB net 28%

NEW DELHI: The second-largest public sector lender, Punjab National Bank, has posted a 28% jump in its net profit for the quarter ended June 2010. The bank’s share, however, closed 0.48% down at `1056.40 on the Bombay Stock Exchange. The BSE’s banking barometer, Bankex, was up 0.71% on Thursday. “Growth in net profit has come from effective management of net interest income, containment of interest expenses and lower cost of funds,” said PNB chairman and managing director KR Kamath.

The bank posted a net profit of `1,068 crore for the quarter ended June 2010 against a net profit of `832 crore during the same period of the previous fiscal. Total income grew by 11% to `6,863.38 crore from `6,177.59 crore in the corresponding period of the previous fiscal. Mr Kamath said the bank expects a 22% increase in advances and a 20% growth in deposits in 2010-11.

The bank’s bad loans or the gross non-performance assets (NPAs) as a proportion of advances went up to 1.82%. “Increase in gross NPAs is on account of higher provisioning against bad assets among others. As long as gross NPA is within the 2% limit, it is tolerable,” said Mr Kamath.

The gross NPA stood at `3,613 crore compared with `2,607 crore in the same quarter last year. The bank’s total business crossed `4.52 lakh crore at the end of June. In this period, deposits rose by 16.6% to `2,18,960 crore while advances jumped by 24.6% to `1,57,979 crore. Capital adequacy ratio of the bank as per the Basel-II norms was 13.7%. Mr Kamath also said if RBI raises the cash reserve ratio, it will put pressure on cost of funds. He added that it was up to RBI to decide. “As a bank, we will respond to the decision taken by the central bank,” he added.

On the Bhutan joint venture, the PNB chief said the bank recently went for public offer which was oversubscribed 6.5 times and the entity would be listed on the Bhutan stock exchange next month.