PNB Q4 Numbers A Let Down, Net Profit Dips By 29% YoY

Punjab National Bank, the second largest public sector lender in India has come out with its fourth quarter of FY14 number on May 13, 2014. Bank posted a subdued number for Q4FY14, with its net profit dropping by 28.7% on yearly basis to Rs 806.35 crore for Q4FY14. The fall in the profit is attributed to subdued rise in net interest income of the bank and significant increase in the provisions & contingencies. 

Net interest income (NII) of the bank increased by mere 5.9% on yearly basis to Rs 4001.8 crore for Q4FY14 against Rs 3778.67 crore posted in Q4FY13. The lower growth in NII is due to large number of accounts turning out to be non-performing. Nonetheless, other income of the bank saw a considerable jump by 19% on yearly basis to Rs 1369.9 crore for Q4FY14.

The operating profit of the bank grew by 11.3% on yearly basis to Rs 3173.43 crore for Q4FY14, however, due to sharp increase in provision & contingencies by 44.7% in the same period to Rs 2138 crore led to fall in the net profit of the bank.

The asset quality of the bank continues to worsen as bank's non-performing asset (NPA) and NPA ratio both saw deterioration on both sequential as well on yearly basis. On absolute terms gross NPA and net NPA of the bank has increased by 14% and 9% respectively on sequential basis. Even the gross NPA and net NPA ratio of the bank has increased by 29 basis points and five basis points to 5.25% and 2.85% respectively. 

Post these bad set of numbers share price of the bank reacted sharply and is down by almost 8% from its today's peak of Rs 877 per share. Currently shares of the bank are trading at price to book value of 0.87 times, which is expensive looking at the deteriorating asset quality and financial performance of the bank.