PNB to raise Rs2,200 crore under Tier 1, Tier 2 capital

31 July 2006

S C Gupta CMD, PNB, is pleased to share that as far as NIM goes, their first quarter ending is 4.10 per cent and YoY, there is 25 bps increase from 3.85 per cent in June 2005 to 4.10 per cent in June 2006. CNBC-TV18 shares with domain-b its exclusive interview with Gupta. Excerpts:

Walk us through where you expect your NIMs to go most importantly in the next few quarters and whether it has been a struggle to hold it this time?
As far as NIM goes, I am pleased to share with you that our first quarter ending is 4.10 per cent and YoY, there is 25 bps increase from 3.85 per cent in June 2005 to 4.10 per cent in June 2006.

Do you see that 4 per cent can be maintained for the remaining nine months of the year?
We are in a position to maintain, or rather improve our NIM. The Punjab National Bank has increased NIM, which was roughly 4 per cent in March 2006 and in June 2006 it is 4.10 per cent. It is sustainable.

Can you take us through your advances growth and your deposit growth and what kind of advances growth you are expecting to see for the remaining nine months?
Presently I am very happy to get a response and demand from all segments of society, right from retail, SME, agri, infrastructure, export, corporate and in any segment because PNB enjoys a distant advantage of having a large network or the branches length and breadth of the country numbering 4,520.

During the last 15 months, we have changed certain systems of our work. We are trying to get growth from all the regions and the maximum number of branches, so the growth in credit is bound to pick up and other area is matching resources.

What has been the growth in credit and what is the target for the remaining nine months?
YoY growth, June 2005-June 2006, in credit is 35 per cent and the deposits are 18 per cent.

And 35 per cent is maintainable you think or it might slip a bit?
No, it will slow down because we have to see from where to get the resources because last year we funded the incremental growth by unwinding security portfolio, which this year probably will not be possible. That is why we have held a number of meetings with our people to increase resources and for the first three months the result has been quite good.

We are giving more attention to the core deposit growth than the Differential Rate of Interest, the DRI. I am sure that if we don't attempt YoY 35 per cent, then around 25-28 per cent will satisfy us.

Your statutory liquidity ratio (SLR) your government bond holding as a percentage of your total deposits, does it stand close to 25 per cent now?
It used to be 38-39 per cent, now it is 28 per cent or three percent more than the prescribed SLR of 25 per cent.

On August 1, we are expecting some of the banks to raise their PLRs, prime lending rate, their sub PLRs, or their home loans or their retail loans, any rate hikes coming from the PNB?
You will hear it because either today evening or tomorrow we are taking a final view as to what is to be done, from which date this is to be made effective. On increase in rate of interest on home loan portfolio and certain other retail loans including BPLR, Benchmark Prime Lending Rate, we will take a decision by this evening or by tomorrow and will come back to you separately on the subject.

What have been the recoveries of your NPAs, non-performing assets?
The gross NPAs, which were hovering around 5.9-6 per cent as on March 31, 2005, first came down to 4.10 per cent in March 2006 and again come down to the level of 3.98 per cent in June 2006 and total credit portfolio is at Rs75,000 crore.

I am now having NPAs in absolute terms of Rs3,200 crore. Net profit, though looks marginally higher in this quarter compared to the last quarter, should be taken as substantially higher because we provided Rs386 crore during the first quarter for depreciation in the government security while transferring from AFS, available for sale category, to HTM.

Will you be tapping the market for any capital any time soon?
We have calculated that during the current financial year, we need total capital between Rs3,000 crore and Rs3,200 crore out of which Rs885 crore Tier 2 capital we have already raised. And Rs2,200 crore will be under both Tier 1, Tier 2 upper and lower in tranches, in next three-six months. The timing is to be decided and the cost has to be decided.

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