PNB - DISAPPOINTING Q3FY12 NUMBERS

The Punjab National Bank (PNB) today reported disappointing Q3FY12 numbers wherein its net interest income has increased by 10 per cent to Rs 3,537 crore while the net profits have increased marginally by 5.50 per cent to Rs 1,150 crore versus the street estimates of Rs 1,262 crore. Most of the bank’s parameters did not show good performance and the scrip Yesterday closed down by 1.63 per cent while today it was up 2.41 per cent to Rs 963. 

The following are the bank’s key financial parameters:

·  In Q3FY12 the net interest margin of the bank contracted by 25 basis points to 3.88 per cent on a YoY basis. One should note that even on a sequential basis it decreased by 7 basis points which is not at all a good sign. On a YoY basis the cost of deposits increased by 154 basis points to 6.74 per cent while its yield on investment increased by 138 basis points to 11.97 per cent.

·  Even the asset quality of the bank has worsened. The gross and net NPAs of the bank increased by 39 basis points to 2.42 and 1.11 per cent respectively.

·   The capital adequacy ratio of the bank decreased by 42 basis points to 11.48 per cent with Tier 1 CAR at 7.85 per cent. On January 30, 2012 the bank informed the exchange that it is to receive capital infusion of an aggregate of Rs 1,285 crore from the government. 

·   As on December 31, 2011 the bank’s deposits grew by 23.4 per cent to Rs 3,56,517 crore while the advances saw a growth of 18.7 per cent to Rs 2,62,605 crore. One should note that the bank’s advances and deposits growth has outpaced the industry’s growth.

·   The CASA share in domestic deposits is 36.2 per cent which is down by 350 basis points on a YoY basis. The bank should focus on saving account deposits as with the deregulation of interest rate other private banks are offering attractive interest rates, which could further result into a reduction of the number of customers.

The bank’s wholesale banking business has been one of the best performing segments. In Q3FY12 the revenue from wholesale banking increased by 48 per cent to Rs 4,788 crore while the result from the same was 38 per cent higher at Rs 1,672 crore. The profit from its treasury operations showed a de-growth of 42 per cent at Rs 108 crore. This, coupled with the higher provisioning of 32 per cent at Rs 946, affected the bottomline of the bank in the December quarter of FY12.

According to media reports, the bank has exposure to aviation heavyweights such as Kingfisher Airlines and Air India and also to companies like GTL and this has affected the financials of the bank. Further, an approximate exposure of 35 per cent of the total advances is towards infrastructure of which 17 per cent is in the power sector and 6 per cent in telecom which is at present looking nervous.