Punjab National Bank, the second largest public sector bank in India in terms of business volumes, in its Q3 earnings call outlined the bank’s stable growth path, targeting 13-14% credit growth with strong asset quality (97% provision coverage ratio). The bank saw lower other income in Q3 due to reduced technical write-off recoveries and negative MTM provisions. The bank addressed that its digital initiatives showed progress with 2 crore mobile app logins and new MSME digital lending up to INR25 lakh. Looking ahead, PNB expects INR5,000-6,000 crore in total Q4 recoveries, maintaining stable deposit costs due to its large CASA base of INR5,62,156 crore, while keeping loan growth guidance at 12-13% for FY25.
Punjab National Bank showcased outstanding financial results in Q3 FY25, with its standalone net profit doubling to INR4,508 crore from INR2,223 crore year-over-year. The bank demonstrated broad-based growth with total income reaching INR34,752 crore and interest income increasing to INR31,340 crore from INR27,288 crore. The bank’s asset quality saw notable improvement, with gross NPAs declining to 4.09% from 6.24% and net NPAs decreasing to 0.41% from 0.96% compared to the previous year. This enhanced asset quality enabled a significant reduction in bad loan provisions to INR318 crore from INR2,994 crore, which helped boost investor confidence and drove the bank’s shares up by 5.54% to INR101.87 on the NSE.
Continue Reading: Discover the Vital Insights from Punjab National Bank’s Earnings Call!
Financial/Operational Metrics:
- Revenue: INR35,286 crore, up 15% YoY.
- Net Profit: INR4,648 crore, up 103% YoY.
- EPS: INR4.18, up 103% YoY.
- Net Interest Income (NII): INR11,032 crore, up 7.2% YoY.
- Total Term Deposit: INR9,67,543 crore, up 24.7% YoY.
Outlook:
- Focus on Digital Capabilities: Expansion of mobile app and WhatsApp banking.
- Capital Strengthening: Tier-1 and Tier-2 capital enhancement to support growth.
Analyst Crossfire:
- Growth Strategy & CEO Transition, Credit Cost & Profitability Outlook (Mahrukh Adajania – Nuvama): Despite the CEO change, PNB will maintain its existing growth trajectory. Strategic adjustments in deposit costs and loan yields will be made to enhance profitability, leveraging a strong corporate book for sustained performance. With a 97% provision coverage ratio (PCR), PNB expects continued low credit costs. Recovery trends exceed slippages, supporting stable profitability and maintaining net interest margin (NIM) in the 2.9%-3% range (Ashok Chandra – MD & CEO).
- SMA Trends & Slippages, Other Income Decline (Jay Mundra – I-Sec, Ashok Ajmera – Ajcon Global): SMA-0, 1, and 2 total 7% of loans, with SMA-0 being the largest portion due to temporary repayment delays in retail accounts. PNB is confident in maintaining slippages at the INR1,600-INR1,800 crore range. A drop in recovery from technical write-offs (TWO) and mark-to-market (MTM) provisions led to lower other income this quarter, but recoveries are expected to pick up in the coming quarters (Ashok Chandra – MD & CEO).
- Treasury Operations & Interest Rate Outlook, Retail Deposit Strategy (Ashok Ajmera – Ajcon Global, Rakesh Kumar – B&K Securities): PNB expects better treasury performance in Q4, aided by RBI’s INR60,000 crore open market operations and potential rate cuts. Despite strong deposit growth of 4.9%, term deposit (TD) costs remained stable due to a special 7.25% deposit scheme and PNB’s high CASA portfolio, which grew by 2.7% (Ashok Chandra – MD & CEO).
- Corporate Lending & Benchmarking, Repricing Strategy for Margins (Rakesh Kumar – B&K Securities): PNB increased the share of T-Bill-linked loans from 8.4% to 11%, a strategic shift rather than corporate pricing pressure. The bank leveraged liquidity for short-term lending to optimize margins. PNB has been repricing corporate loans below 7% and adjusting spreads on short-term borrowing to protect margins despite shifting to T-Bill-based lending (Ashok Chandra – MD & CEO).
- Repricing Strategy for Margins & Actuarial Provisions (Rakesh Kumar – B&K Securities): PNB has been repricing corporate loans below 7% and adjusting spreads on short-term borrowing to protect margins despite shifting to T-Bill-based lending. PNB increased provisions in Q2 due to yield fluctuations but now expects a stable provision of INR1,400 crore per quarter based on current assumptions (Ashok Chandra – MD & CEO).
- Recovery Target for FY25 (Aditi Nawal – Individual Investor): PNB aims to achieve INR18,000 crore in recoveries, with INR5,000-6,000 crore expected in Q4 from delayed corporate recoveries. PNB expects strong future recoveries from its INR91,000 crore TWO book, including INR54,000 crore in NCLT cases (Ashok Chandra – MD & CEO).
To get further Insights: Click Here
