State run Punjab National Bank (PNB) posted the largest quarterly loss ever reported by an Indian lender, after it was forced to set aside more funds, as bad loans more than doubled from the previous year.
Delhi based PNB made a net loss of Rs.5,367 crore in the first quarter compared with a profit of Rs.307 crore the year earlier.
India’s banks are being compelled to clean up their books under an Asset Quality Review initiated by the Reserve Bank of India. Five other state-run banks have also reported large losses, including Bank of Baroda, UCO Bank, Central Bank of India, Allahabad Bank and Dena Bank.
Investors seemed to be accepting the numbers, indicating optimism that the worst may now be over for the country’s second biggest state run lender. PNB’s CEO Usha Ananthasubramanian admitted the current economic situation will continue for some time, but the bank has completed its Asset Quality Review.
PNB also hopes to recover Rs.15,000-20,000 crore of loans gone bad over the next year, and is looking to unlock the value of its non-core assets to raise capital but the timing will depend on market conditions.