Mumbai: Punjab National Bank (PNB) on Tuesday posted an 11.06 per cent increase in net profit at Rs 230.11 crore for the third quarter ended December 31, 2017 on the back of declining bad loans.

The public sector lender had reported a net profit of Rs 207.18 crore in the corresponding period of the last fiscal.

Although operating profit surged 53 per cent to Rs 4,245 crore, net profit was hit by a massive increase in the provisions for depreciation on investments, which includes the lender's treasury book.

"This year our bank, as most others, had a hit on the treasury...There was incremental provisioning requirement which we never had in the past. This quarter was a little tough on the treasury," PNB managing director Sunil Mehta said.

The bank's provisions and contingencies rose 74.3 per cent in the quarter to Rs 4,467 crore, with provisions for depreciation on investment rising more than eight-fold to Rs 1,075 crore.

PNB's total income increased 8.02 per cent to Rs 15,257.50 crore for the quarter under review from Rs 14,123.98 crore in the year-ago period.

Its gross non-performing assets (NPAs) or bad loans, as a percentage of total advances, declined to 12.11 per cent from 13.70 per cent in the same quarter of the last fiscal. Net NPAs also fell to 7.55 per cent from 9.09 per cent.

Fresh slippages in the quarter amounted to Rs 3,950 crore while cash recovery rose substantially to Rs 9,283 crore as against Rs 3,720 crore in the same period a year ago.

The bank expects to see good recoveries in the fourth quarter of the current fiscal. PNB has about 95 accounts in the NCLT with total exposure of Rs 18,000-19,000 crore.