Hit by higher provisioning against bad loans and a dip in treasury income, Punjab National Bank on Friday reported a modest 7.8 per cent rise in net profit to Rs. 1,090 crore for the quarter ended December, 2010.

It had posted a net profit of Rs. 1,011 crore for the third quarter of the previous fiscal.

At the same time, the bank’s net interest margins (NIM) registered a minor increase to 4.13 per cent in the third quarter from 4.06 per cent in the second quarter of the current fiscal.

The current level of margins is not sustainable in future, PNB Chairman and Managing Director K.R. Kamath said after announcing the third quarter results.

During the quarter, the bank provisioned Rs. 713.8 crore against its various liabilities — including a second pension option for serving and retired employees that had not subscribed to the scheme — as against Rs. 281.8 crore in the same quarter a year ago.

Treasury income of the bank declined during the quarter to Rs. 87 crore from Rs. 157 crore in the same quarter a year ago.

The bank’s total income rose by 27.9 per cent to Rs. 7,976 crore during September-December, 2010. However, its gross Non-Performing Assets (NPAs) also increased to 2.03 per cent of total credit from 1.69 per cent at the end of December, 2009.

Net NPAs also rose to 0.72 per cent of total assets from 0.48 per cent at the end of third quarter last fiscal.

“We are in a position to handle this level of NPA,” Mr. Kamath said.

Net Interest Income (NII) improved by 44.8 per cent during the third quarter to Rs. 3,203 crore. In addition, advances grew by 29.8 per cent to Rs. 2,21,252 crore by the end of December 30, 2010.

At the same time, deposits grew by 23.5 per cent to Rs. 2,88,873 crore at the end of December, 2010.

Giving his perspective on interest rates going forward, he said, “There is pressure on rates. There is pressure on margins. There is strong upward bias on the interest rates.”

Liquidity is tight at the moment and banks are drawing about Rs. 1 lakh crore from RBI, he said.

Nevertheless, PNB has surplus liquidity as of now, he added.

PNB’s net profit grew by 16.7 per cent in the first nine months of the current fiscal to Rs. 3,233 crore from Rs. 2,770 crore in the same period last fiscal.

At the same time, total income rose to Rs. 22,013 crore against Rs. 18,489 crore in the same period a year ago.

Total business of the bank crossed Rs. 5 lakh crore to Rs. 5,10,125 crore in Q3, FY’11, from Rs. 4,04,373 crore in the third quarter of the previous fiscal — translating into a growth of 26.2 per cent.

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