Punjab National Bank reported record quarterly loss of £1.34 billion as the fraud by high-profile diamond merchants Nirav Modi and Mehul Choksi prompted it to set aside more funds in addition to the pressure from non-performing assets (NPAs). The quarterly loss is more than the loss of £ 1.23 billion incurred by PNB during 2017-18 and beats the bank's own record quarterly loss of over £500 million during October-December 2017.
Finances have been under pressure with lower income, while expenses shot up. Management of the country's second-largest public sector lender, opted against quarterly press conference to announce results and made the disclosure to stock exchanges. Following a reprieve from the RBI, the bank made provisions of £717.8 million for Modi fraud during the March quarter, with an equal amount to be set aside during the first three quarters of the current financial year. Although the blow from the estimated at £1.43 billion has been softened, the impact will be felt during the first nine months of 2018-19.
Stress in the corporate sector in addition to new RBI norms pushed up the bank's gross NPAs to over 18 per cent of its advances at the end of March, from a little over 12 per cent a year ago. High provisions meant that PNB's capital adequacy ratio, especially tier-I capital, has come under pressure, requiring urgent capital infusion. With the government's hesitance to pump in money into state-owned banks, the Delhi-headquartered lender is banking on sale of non-core assets to shore up its capital base. PNB is also banking on a 4 per cent stake sale in life insurance company PNB Metlife, apart from divestment of a part of its stake in PNB Gilts. A bank executive said, “We will wait till the end of the current quarter and see if we need to raise fresh equity.”
