PNB’s Flat Q1FY14 Result; Deteriorating Asset Quality

Punjab National Bank (PNB) reported a flat first qurter result today. The stock has been considerably down since today morning. However, it recovered slightly and closed at Rs 596, down by 5.15% from yesterday's closing.

PNB reported marginal growth of 0.21% in its total income to stand at Rs 11746 crore for Q1FY14 against Rs 11,721 crore in Q1FY13. The bank's other income increased by almost 15% to Rs 1342 crore in this quarter against Rs 1168 crore in Q1FY13. Interest earned (total income excluding other income) by the bank during this quarter decreased by 1.42% against the corresponding period of the last fiscal.

The company's net interest income (NII) increased by 5.80% to Rs 3907 crore during the period under review against Rs 3693 crore in Q1FY13. The NII increased by 3.47% on a sequential basis over the previous quarter. However, the bank’s operating expenses increased by 12.65% over the corresponding period last year due to an increase of 13.82% and 9.88% in employee costs and other operating expenses respectively. The bank's net profit increased to Rs 1275 crore during this quarter from Rs 1032 crore with a marginal growth of 2.38%.

The bank's percentage gross NPAs increased to 4.84% from 4.27% on a sequential basis (Q4FY13). The bank's net NPAs also increased to 2.98% from 2.35% in Q4FY13. There has been a marginal increase in the bank's NPAs. Interestingly, the bank has decreased the provision and contingencies by almost 28% to Rs 1066 crore in Q1FY14 against Rs 1477 crore in Q4FY14. This may be the major reason for downfall of the bank's stock price during today's trading session.