Punjab National Bank second quarter profit up 4%

The lender to acquire 30% of MetLife India Insurance to diversify its business.

Punjab National Bank Thursday posted a muted 4% rise in quarterly net profit, and said it will buy a 30% stake in MetLife Inc.'s (MET) Indian life insurance joint venture as the state-run lender expands to new businesses.

Punjab National said its April-June net profit rose to INR11.05 billion ($250.73 million) from INR10.68 billion ($242.36 million) a year earlier as higher interest costs, provisions for bad loans and employee benefits hurt its margin growth.

Earnings for most Indian lenders are expected to be modest as several rounds of interest rate hikes by the central bank to combat high inflation have sharply raised their cost of funds.

Punjab National's core net interest income--the difference between interest earned and interest paid--rose 19% to INR31.17 billion ($707.36 million) from INR26.19 billion ($594.35 million) a year earlier. Its net interest margin declined to 3.84% from 3.91% because of higher cost of funds.

The bank expects to have a net interest margin of 3.5% for the fiscal year through March, Chairman K.R. Kamath said.

It is likely to post 20%-22% loan growth during the fiscal year due to demand from the agriculture sector and small and medium enterprises, Kamath told television channel CNBC-TV18.

View the full story in The Wall Street Journal.