Punjab National Bank Q3 FY24 Earnings Conference Call Insights

Key highlights from Punjab National Bank (PNB) Q3 FY24 Earnings Concall

• Business Growth
  • Total business grew by 10.82% year-over-year to INR 22,90,074 crore.
  • Deposits grew by 9.35% to INR 13.23 lakh crore.
  • Advances grew by 12.90% to INR 9.67 trillion.
• Profitability
  • Net interest income increased by 12.14% to INR 10,293 crore.
  • Operating profit increased by 10.77% to INR 6,331 crore.
  • Net profit increased by 253.39% to INR 2,223 crore, highest in last 15 quarters.
• Asset Quality
  • Gross NPA reduced from 9.76% to 6.24% and from INR 83,584 crore to INR 60,371 crore.
  • Net NPA reduced from 3.3% to 0.96% and from INR 13,114 crore to INR 8,816 crore.
  • Provision coverage ratio increased from 85% to 94%.
• Capital Adequacy
  • Total capital adequacy stands at 14.63%, reduced from 15.09% due to increase in RWA.
  • Board approved raising INR 12,000 crore capital in FY23, of which INR 7,153 crore already raised.
  • Board also approved raising INR 7,500 crore equity capital in FY24.
• Credit Costs
  • Credit costs reduced from 1.26% in Dec 2022 quarter to 1.31% in Sep 2023 quarter.
  • Provisions reduced from INR 3,018 crore in Sep 2023 quarter to INR 2,993 crore in Dec 2023 quarter.
  • Expects significant reduction in provisions going forward due to high PCR of 94%.
  • Credit costs expected to be around 1% or lower in FY24 versus 1.5% guidance for FY23.
• Wage Revision Provisions
  • Provided INR 800 crore for wage revision in Q3FY23, up from INR 694 crore in Q2FY23.
  • Went from providing 10% to 14% in Q2 to providing 17% in Q3 on basic pay since Nov 2022.
  • Staff costs remained flat QoQ as wage provision was offset by lower AS15 provision of INR 322 crore versus INR 1,330 crore in Q3FY22.
• NIMs and Yields
  • NIM increased QoQ to 3.15% from 3.05%.
  • Expects NIM to remain around 3% guidance.
  • Focus is on growing NII in absolute terms quarter-on-quarter.
  • Yield on advances increased by 29-30 bps QoQ while cost of deposits was up 10 bps.
  • Helped drive 12.14% growth in NII QoQ.
• Deposit Growth
  • Not focused on raising high cost bulk deposits given excess SLR and strong CASA.
  • Low cost CASA deposits up 6.26% YoY.
  • Opened 76.65 lakh savings accounts in 9MFY23 versus 85 lakh in FY22.
  • Expects deposit costs to remain elevated over next 6 months.
  • Loan repricing will also take time to come off.
• Retail/Corporate Loan Growth
  • Seeing good demand in vehicle, housing and personal loans.
  • Housing up 30%, vehicle loans up 26%, personal loans up 30%.
  • Overall retail, agri, MSME (RAM) to continue growing at 15-16%.
  • Expects some increase from 10-11% yoy growth currently.
  • Demand starting to pick up but not a sharp jump.
  • Guidance remains at 12-13% growth for FY23.
• NCLT Recoveries
  • Recovered INR 1,831 crore from NCLT accounts in Q3FY23.
  • Expects around INR 4,000-5,000 crore of annual recovery from NCLT accounts.
  • Accounts for about 1/3rd of total recoveries; focused on recovery from all sources.
• Return on Assets
  • Targeting ROA of 1% by end of FY24-25.
  • Significant reduction in credit costs will help drive ROA higher.
  • Provision cover at 94% will also support profitability.
• ECL Implementation
  • Final ECL guidelines still in draft form, up to regulator to decide timeline.
  • Bank is ready for implementation whenever final guidelines released.
  • Not overly concerned given current high PCR of 94%.
• Digital Spends
  • Annual budget for IT is around INR 2,500 crore.
  • Major HR transformation project underway, to be implemented by Mar 2024.
  • Adequate investments being made in HR and digital.