Punjab National Bank – Q3FY13 Result Review

Punjab National Bank (PNB), today, reported a decent set of Dec 2012 quarter numbers. The stock has moved higher by 7.03% to Rs 903 per share mainly because the streets had negative expectations on the result front from the bank. The bank posted higher profit majorly after lower provisioning as also, it witnessed an improvement on its asset quality front. The key financial parameters of the bank are as follows:

The Net Interest Income (NII) for the December quarter grew marginally by 5.57% to Rs 3733 crore while profit increased by 13.53% to Rs 1305 crore on a YoY basis. Profit of the bank grew after it made lower provisions which stood at Rs 802 crore against Rs 946 crore in the similar period last year.

The bank witnessed an improvement in its asset quality, which is commendable. Gross and Net NPA of the bank decreased by 5 and 13 basis points to 4.61% and 2.56% respectively on a sequential basis. Provision coverage ratio (PCR) of the bank stands at 55.97%, which is way below the RBI guidelines of 70%.

As on Dec 31, 2012, the Capital Adequacy Ratio (CAR) as per Basel II norms for the bank grew by 18 basis points to 11.66% on a YoY basis.

On the segmental performance, revenue from Treasury and Wholesale banking segment witnessed a decent growth of 25% and 17% respectively, while profit from the Wholesale banking remained subdued growing by 3.51% to Rs 1730 crore. While Profit from Treasury doubled, standing at Rs 222 crore against Rs 108 crore in the similar period last year.

Overall, we believe that the bank posted decent numbers. However the stock reacted sharply as it was because of the street’s expectations of bad numbers that the stock has moved higher in today’s trading. On the valuation front, the bank is currently available at a Price-to-book value of around 1x. We believe that risk takers may enter the counter while for others, we would advise to apply a wait-and-watch strategy.