Punjab National Bank (PNB) reported a third straight quarterly loss on Friday as it set aside more money to account for a massive fraud, potentially frustrating the lender’s plan to return to a profit for the year.
Net loss came in at 45.32 billion rupees ($622.74 million) for the three months ended Sept. 30, compared with a profit of 5.61 billion rupees a year earlier, and much bigger than an estimated average loss of 14.38 billion rupees, according to Refinitiv data.
PNB said earlier this year that staff at a Mumbai branch issued fake bank guarantees between 2011 and 2017 to help the firms of Indian diamond magnate Nirav Modi and his uncle Mehul Choksi raise billions of dollars in foreign credit.
Including 32.95 billion rupees the lender set aside to cover the fraud, total provisions in the quarter nearly quadrupled to 97.58 billion rupees.
PNB owes banks a total 143.57 billion rupees for the illegal guarantees. The central bank has allowed the lender to spread the scam-related provisions over four quarters to December 2018.
However, asset quality, an issue troubling mainly state-run banks in the country, improved quarter-on-quarter at PNB. Gross bad loans as a percentage of total loans stood at 17.16 per cent at the end of September, compared with 18.26 per cent at the end of June, and 13.31 per cent a year earlier.
Earlier in the quarter, PNB had outlined measures to recover 200 billion rupees worth of bad loans, and said it planned to report a profit for the full year as it completes provisioning for the fraud and as bad loan additions slow.
Shares of the 124-year-old bank, which have lost more than half their value since the fraud came to light in late January, rose as much as 5.9 per cent after the results but then reversed direction to be down 1.3 per cent.
Want stories like this in your inbox?
Sign up to exclusive daily email
More Stories from Banking