PNB's gross non-performing assets to be in single digit by year end: MD Atul Kumar Goel

State-owned Punjab National Bank (PNB)  expects its gross and net non-performing assets (NPAs) to decline by 50 basis points (bps) every quarter going ahead, said MD and CEO Atul Kumar Goel on Friday, after the lender reported its earnings for the first quarter of the financial year 2023 with an improved asset quality and a sharp decline in net profit.

“The number of gross NPA was 11.78 percent in March 2022 which has reduced to 11.27 percent, there is a reduction of around 51 basis points. Similarly, the net NPA was 4.80 which has reduced to 4.28, there is a decline of around 52 basis points. Our guidance is that every quarter it will be declined by 50 basis points," Goel told CNBC-TV18. One basis point is one-hundredth of one percentage point.

Goel added that the gross NPAs of the bank will be in single digit by the end of the financial year while net NPAs will be less than 3.5 percent by that time.

PNB reported its first-quarter earnings on Thursday with a fall of 70 percent in standalone net profit to Rs 308.44 crore owing to a fall in interest income and higher provisioning for bad loans.

Its shares were trading 3.53 percent lower at Rs 31.45 per share on BSE at the time of writing. The stock touched day's low of Rs 31.3 per share, down 3.99 percent and underperformed the sector by 3 percent.

In the last one year, the stock has fallen 20 percent, underperforming Sensex by 29.39 percent while year-to-date, it has fallen 15.95 percent.

The company's total income declined to Rs 21,294 crore from Rs 22,515 crore a year ago while interest income fell to Rs 18,757 crore from Rs 18,921 crore in the first quarter.

Provisions for bad loans rose to Rs 4,814 crore as against Rs 3,248 crore in the same period last year.

However, asset quality improved with the gross NPAs falling to 11.2 percent of the gross advances from 14.33 percent a year ago and the net NPAs declining to 4.26 as against 5.84 percent in the same period of the previous year.

Goel said that the company is aiming at a recovery in the range of Rs 9,000-10,000 crore per quarter while the slippages are expected to be below Rs 6,000 crore every quarter.

The company's target is also to increase net interest margin (NIM), which came in at 2.79 percent for the June quarter, to 2.85 or 3 percent and reduce credit cost, 2.46 percent in the quarter under review, to 2.25 percent for the whole year.

On SMA-2 book, Goel said, “The SMA book was 11,730 (cr) at the close of June 2022 and as on date, it has reduced to 8,438 (cr).”

SMA-2 is principal or interest payment overdue between 61-90.

There are no plans to sell stake in PNB Housing Finance, said the MD, adding that the bank will invest Rs 500 crore the housing arm when the company announces rights issue of Rs 2,500 crore.

The board of PNB Housing Finance had given its nod for the proposal of issuing shares through rights issue to raise up to Rs 2,500 crore in order to meet capital adequacy norms and support business growth.