Hit by higher provisioning towards bad loans, Punjab National Bank (PNB ) on Tuesday reported a modest 12.1 per cent growth in net profit at Rs 1,205 crore for the second quarter ended September 30, 2011.
The bank's net interest margin (NIM), the difference between interest income and interest pay out, declined to 3.95 per cent in the second quarter from 4.06 per cent in the corresponding period of previous year.
During the quarter, the bank's provisioning against its liabilities, including bad loans, increased 29 per to Rs 1,323 crore. It was Rs 1,026 crore in the same quarter a year ago.
"This year there has been a change in provisioning norms by Reserve Bank of India. This has led to aggressive provisioning during the September quarter," PNB Chairman and Managing Director K R Kamath said.
On the possibility of bank raising its lending rates, he said, PNB will take a view after seeing market trends.
For PNB, provisioning for standard assets have gone up by 147 per cent to Rs 95 crore in the September quarter, from Rs 39 crore a year ago. Also provisioning for restructured assets have increased to Rs 79 crore from Rs 40 crore.
Provisioning of non-performing assets (NPA) on deposits less than Rs one lakh has been to the tune of Rs 430 crore.
Besides, depreciation of investments during the quarter accounted for Rs 161 crore.
"When we closed the year (2010-11), the G-sec rate was 8.44 per cent. But since that rates have improved and we have made additional provisions to the tune of Rs 110 crore and covered for yeild up to 8.62 per cent," Kamath said.
Yields on the 10-year 2021 gilt yield were at 8.44 per cent in September-end, compared with 8.33 per cent a quarter ago and 7.85 per cent in the previous year.
In May, the RBI had hiked provisioning required on certain NPAs of banks. As per the new norms, secured exposures under doubtful assets of up to one-year would attract a provision of 25 per cent, up from 20 per cent earlier.
During the July-September quarter, total income of the bank rose to Rs 9,840.87 crore during the second quarter from Rs 7,173.68 crore in the same period last fiscal.
As at the end of September, deposits increased 25 per cent to Rs 3.41 lakh crore, while advances were up 19.3 per cent to Rs 2.49 lakh crore.
"As far as the credit growth is concerned in H1 we had a growth of 19 per cent. we expect to end the year with 19-20 per cent credit growth. It will be 1-2 per cent better than the industry," PNB said.