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.