Fraud-hit PNB reports biggest ever loss of Rs 13,417 cr in Q4

Fraud-hit Punjab National Bank (PNB) reported a whopping loss of Rs 13,417 crore for January-March quarter. The loss is almost equivalent to the amount it lost in the fraud allegedly perpetrated by diamond merchants Nirav Modi and his uncle Mehul Choksi. It is the biggest loss reported by an Indian bank for any three-month period. The bank’s bottom line was hit by exceptionally high provisioning made for fake letters of undertaking (LoUs) given to other lenders and high NPAs.  The total provisions in the three months to March 31 more than tripled from a year ago period to Rs 22,353 crore, of which Rs. 7,178 crore were due to the fraud, the bank said.

The lender, which has been allowed by the central bank to spread the fraud-related provisions over four quarters, said it would make the remaining Rs 7,178 crore of provisions in the three quarters that begin on April 1.
It further said that as a prudent measure, the bank has created liability in the books in respect of LoUs/FLCs, which are becoming due after March 31 amounting to Rs 6,959.79 crore.

“The bank will make payments to the concerned banks on the due dates of LoUs/FLCs. After including outstanding amounts under other credit facilities to the above entities, the amount involved now works out to be Rs 14,356.84 crore,” PNB said in a regulatory filing.

Shares of PNB fell by 6 per cent after the company posted announced the losses. Finance ministry sources said the bank is expected to post strong result from Q2 (July-September) onwards and would not slip into PCA under RBI monitoring scheme for high bad loans.

PNB said its total liability works out to Rs 14,356.84 crore due to the fraud Nirav Modi and associates. “The liabilities on account of LoUs/FLCs, which became due up to March 31, 2018 amounting to Rs 6,586.11 crore have been paid by the bank...” PNB said in a regulatory filing..

The total income for the fourth quarter declined to Rs 12,945.68 crore from Rs 14,989.33 crore in the year-ago period. Its operating expenses rose Rs 5,072 crore in Q4 due to high contribution into the pension schemes as compared to Rs 555 crore a year ago.

The bank saw deterioration in gross net performing assets (NPAs) or bad loans, which rose to 18.38 per cent of gross advances at the end of March this year, as against 12.53 per cent year ago. Net NPAs also soared to 11.24 per cent against 7.81 per cent a year ago. NII or Net interest income (the difference between interest earned and expended) was down by 16.8 per cent to Rs 3,063.3 crore, as against Rs 3,683.5 crore in the same quarter a year ago. Non-interest income or other income halved to Rs 1,561 crore versus Rs 3,102.80 crore in March quarter ending 2017.  For the full year ending March 2018, PNB’s net loss stood at Rs 12,130 crore as against a net profit of Rs 1187 crore in FY17.