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By Chris Thomas and Manoj Kumar
State-run Punjab National Bank (PNB) posted a surprise quarterly profit as the fraud-hit lender's provisions slid and asset quality improved, and it expects to further bring down its bad loan ratio in the current quarter.
The results come nearly a year after PNB revealed it was hit by a $2 billion fraud, with two jewellery groups defrauding it in India's biggest banking scam. That dragged the bank to three straight quarters of losses including the biggest ever quarterly loss for an Indian bank recorded by PNB in the March quarter last year.
The jewellery groups had raised credit overseas with fake guarantees issued by rogue staff at PNB's Mumbai Brady House branch.
"We are back in (the) black, after 100 percent provisions for all our commitments," PNB chief executive Sunil Mehta told an earnings briefing.
Asset quality at PNB, India's second-largest state-run lender by assets, improved quarter-on-quarter, with gross bad loans as a percentage of total loans easing to 16.33 percent at the end of December from 17.16 percent at the end of September. This was still higher than 12.11 percent a year earlier.
Mehta said the bank expects to bring down its gross NPA by at least 200 basis points in current quarter.
For an interactive graphic on the bad loans ratio at some Indian public-sector lenders, click https://tmsnrt.rs/2SctGNH
In the three months to Dec. 31, PNB posted a net profit of 2.47 billion rupees ($34.44 million), compared to a profit of 2.3 billion rupees a year earlier. Analysts on average had expected a loss of 10.63 billion rupees, according to Refinitiv Eikon data.
Provisions in the quarter, which included those for bad loans and funds set aside in relation to the scam, dropped 38.3 percent to 27.54 billion rupees.
The bank set aside 20.14 billion rupees in the quarter for the illegal guarantees, completing its provisioning for the 143.57 billion rupees it owes banks for the scam.
PNB also got a write-back of provisions for 1.63 billion rupees in the quarter from accounts under the Insolvency And Bankruptcy Code.
India's banking sector has struggled under crippling levels of bad debt for years, with state-run banks including PNB and larger rival State Bank of India (SBI) holding the majority of the soured assets.
However, last week, SBI posted its highest quarterly profit in nearly seven years, helped by a drop in bad loan provisions, a write-back on provisions made for mark-to-market losses, and higher net interest income on the back of healthy growth in loans.
PNB shares closed up 0.3 percent on Tuesday in a firm Mumbai market after the results.
($1 = 71.7210 Indian rupees)
(Reporting by Chris Thomas in Bengaluru and Manoj Kumar in New Delhi; Editing by Muralikumar Anantharaman)