Punjab & Sind Bank Q3 FY24 Earnings Conference Call Insights

Key highlights from Punjab & Sind Bank (PSB) Q3 FY24 Earnings Concall

• Financial Performance
  • CASA ratio improved by 158 bps to 32.77% sequentially.
  • NIM improved by 21 bps to 2.54% sequentially.
  • Net interest income grew 9.48% to INR 739 crores sequentially.
  • Gross NPA improved to 5.70%, decline of 53 bps.
  • Operating profit improved to INR 277 crores sequentially.
  • Yield on advances improved significantly to 8.91%, up 29 bps.
• Business Growth
  • Total business crossed INR 2 lakh crore in Q3, growth of 7.84%.
  • Deposits grew 8.09%, retail term deposits grew nearly 9%, CASA grew 6.38%.
  • Retail advances up 15.5%, agri advances up 6.12%, MSME up 12.84%.
  • RAM percentage improved from 49.47% to 51.46% on Y-o-Y basis.
  • Core fee income increased by 35.29%.
  • Fresh slippages contained at INR 228 crores, lowest in 4 quarters.
  • SMA 2 book above INR 5 crores declined to INR 201 crores from INR 407 crores.
• Outlook
  • Expect INR 350-400 crores recovery from NCLT and other bad debts in current quarter.
  • Targeting 6-8% credit growth this quarter given dynamic environment and focus on bottom line protection.
  • Aim to maintain NIM in 2.50-2.55% range in line with 9M NIM of 2.50%.
  • Plan to raise INR 250 crores via QIP, will revisit plans and announce details after consulting committees.
  • Currently comfortable capital adequacy ratio of 16.13%, so no immediate need.
• Interest Expense Trends
  • Increase driven by higher deposit and borrowing costs.
  • CASA migration also contributed but cost deposit up only 3bps vs 29bps increase in yield on advances.
  • Able to grow qualitatively while protecting bottom-line.
  • Cost-to-income ratio increased due to INR 150 crores of exceptional wage revision expenses.
• Credit Growth Outlook
  • Targeting 6-8% growth this quarter.
  • Consciously limiting corporate lending given high competition.
  • Focus on profitable RAM sectors leveraging tech upgrade.
  • Expanding services like digital lending through fintech tie-ups.
  • Scaling up products like gold loans, personal loans etc.
  • Raising RAM share from 51% currently to 60% next fiscal.
• Falling Bond Yields Impact
  • Positive MTM impact on profits and cost-income ratio.
  • Provided for depreciation last few quarters, got some reversal in Q3.
  • Further yields decline to boost profits.
  • Rate cut transmission will reduce EBLR loans cost.
  • May enable higher income if investment yields can be maintained.
• HR Transformation Plans
  • Currently focused on upgrading technology.
  • Will now work on HR processes like succession planning, competency mapping.
  • Arranged specialized trainings in project and infrastructure financing.
  • Planning initiatives around performance management, training, transfers etc.
  • Sending top executives for training at reputed institutes.
  • HR changes including lateral hires and training throughout 2024.
  • Already hired CRO, other CXOs joining by April post notice period.
• Undisbursed Loans Position
  • Around INR 500 crores of undisbursed sanctioned loans currently.
  • Mainly pertains to infrastructure loans with pending disbursements.
• Co-lending Business Progress
  • Grown co-lending book to INR 1,800 crores with over 10 partners.
  • Earlier focused on priority sector, now entering non-priority sector as well.
  • Also exploring direct assignment route, expected to implement after more tech readiness.