While Punjab National Bank has recorded a 42% y-o-y drop in net profit this quarter, it has done well on the operating profit front, as other business parameters improve, according to
KR Kamath, chairman and managing director. In a media interaction, Kamath explains what he expects in the near future.
What kind of change has your lending portfolio undergone? Which sectors are you focussing on?
In terms of the exposure to commercial real estate, our loan book had a negative growth of over 16%, infrastructure growth came down to single digits and the telecommunication book also shrunk. The power sector loan book growth slowed to around 15% from about 20% in the past, and loan growth to the road sector came down to single digits.
You had earlier said that from the third quarter, PNB will move into the growth phase after a year-long consolidation process that ended in Q2. But your net profit is down 42%. Why so?
In terms of operating profit, we have done well. But in terms of net profit, there is a reduction. Net profit is a function of our provisions and we would always like to see if we have more space to make provisions. And when I said that PNB would be in the growth phase, I meant in terms of business, and our business has improved. I did say that, by March end, we will catch up with the industry, which we will.
What would be the impact on margins due to RBI?s decision to raise rates?
I have said that because of the pressure in margins, they might come down. But having said that, we have improved our margins and I will continue my guidance for the last quarter.
Will you tinker with your interest rates on the lending or the deposit side?
The rate of interest that has been talked about in this country is always from the borrower side and never from the depositor side. Today also, the RBI governor has said that with the consumer price index somewhere around 9%, depositors should be given a free treatment. And even a 9% rate has a small negative impact on them because of inflation. Now, when we need to hold on to the rates, I think we also have to hold on to the lending rates. If the demand for credit improves, then, possibly, if the deposit growth is not increasing, we may have to increase the interest rate on deposits. So, the deposit rate for the bank would directly depend on the demand for credit.
What is your outlook on asset quality? What kind of restructuring are you expecting to see?
Asset quality is the result of the state of the economy. Now, as the economy improves, it?s reflected in our books. Restructuring should taper down as well.
