The Quality of PNB Assets is on Thin Ice

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The investors were surprised when the Punjab National Bank (1) declared 300 crores INR net profit in the June quarter. As many of them were expecting a net loss in the quarter from PNB.  

However, most of the profit came from abstinence because of the bad loans of the bank. These loans are decreased because of the moratorium. Nonetheless, there is a reduced requirement to provide provisions. After merging with the Oriental Bank of Commerce and the United Bank of India, the bank has released the integrated entity metrics. The outstanding requirements dropped by 1.5% during the June quarter while profit before tax observed a massive fall of 65%.


Despite Forbearance, PNB to have Tough Time with Bad Loans.

Even though the PNB has shown forbearance, there are signs that it may have a tough time dealing with its bad loans. One of the interpretive sign is its forecast on credit costs. The bank is expecting that the credit cost would remain around 2.5% in the financial year 2021. The price is similar to the current June quarter. 

Hence, the recoveries and upgrades won’t be sufficient to neutralize the drops. Further, there are very slim chances of loan recoveries due to the economic slowdown. PNB could only recover from the insolvency cases after their conclusion. 

The latest failures may get suppressed as the PNB would implement the restructuring scheme as the moratorium ends this month. Notably, the bank’s loan book is already rancid by 14%, and at least one-third of the remaining book is under moratorium. As per the PNB, they make soon restructure 5 to 6% of its loan book. However, there are many risks within the next filling.

However, the final figure is highly dependent on the scheme’s outlines as prescribed by K V Kamath, says S. S. Mallikarjuna Rao, the MD of PNB. 

The analysts are flagging off the high moratorium level and lousy loan ratios. The bank is preparing to raise the capital in the remain quarters of the FY2020. PNB also requires good borrowers, along with equity. However, it isn’t looking easy considering the current economic recession. 

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Rucha Joshi, currently managing a team of over 20 content writers at TimesNext is fueled by her passion for creative writing. She is eager to turn information into action. With her hunger for knowledge, she considers herself a forever student and a passionate leader.


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