1. Research
  2. Recommendation
  3. Equity

Punjab National Bank: Q2 FY12

India Infoline News Service | Mumbai |

The C/D ratio deteriorated for yet another quarter to 73%. On account of modest credit expansion in H1 FY12, we believe that it would be difficult for PNB to grow ahead of the system in FY12.

  • Loan growth remained modest; deposit growth continue to be strong
  • NIM expansion was better than expected; guidance factors some margin compression 
  • Core fee income declines sharply on sequential basis; C/I ratio deteriorates 
  • Asset quality continues to be weak; capital adequacy remains reasonable 
  • Valuation re-rating unlikely in near term; Retain Market Performer

Result table

(Rs m)
Q2 FY12
Q1 FY12
% qoq
Q2 FY11
% yoy
Total Interest Income
89,520
83,152
7.7
64,554
38.7
Interest expended
(54,994)
(52,000)
5.8
(34,787)
58.1
Net Interest Income
34,526
31,153
10.8
29,767
16.0
Other income
8,889
10,837
(18.0)
7,183
23.8
Total Income
43,414
41,990
3.4
36,950
17.5
Operating expenses
(18,137)
(17,250)
5.1
(15,949)
13.7
Provisions
(7,103)
(8,935)
-
(5,160)
-
PBT
18,175
15,804
15.0
15,841
14.7
Tax
(6,124)
(4,753)
-
(5,095)
-
Reported PAT
12,050
11,051
9.0
10,746
12.1
EPS
152.1
139.5
9.0
136.3
11.6

 

Key  Ratios
Q2 FY12
Q1 FY12
chg qoq
Q2 FY11
chg yoy
NIM (%)
4.0
3.8
0.1
4.1
(0.1)
Yield on advances (%)
11.9
11.4
0.5
10.6
1.4
Yield on Funds (%)
9.0
8.7
0.3
8.2
0.9
Cost of Deposits (%)
6.5
6.3
0.2
5.0
1.6
Cost of Funds (%)
5.5
5.4
0.1
4.4
1.2
CASA (%)
36.3
37.4
(1.1)
40.6
(4.3)
C/D (x)
0.73
0.75
(0.02)
0.76
(0.04)
Non-int. income (%)
20.5
25.8
(5.3)
19.4
1.0
Cost to Income (%)
41.8
41.1
0.7
43.2
(1.4)
BV (Rs)
7.2
9.5
(2.3)
7.2
0.0
RoE (%)
705.4
667.4
38.0
582.7
122.7
RoA (%)
21.6
20.9
0.7
23.4
(1.8)
CAR (%)
1.2
1.2
0.1
1.4
(0.2)
Gross NPA (%)
12.2
12.4
(0.2)
12.6
(0.4)
Net NPA (%)
2.1
2.0
0.0
1.9
0.1

Source: Company, India Infoline Research

 

Loan growth remained modest; deposit growth continue to be strong

Against our expectation of 3-4% qoq growth, PNBs loan book grew lower by 2.5% qoq. On yoy basis, growth momentum moderated further to 19% yoy (23.5% in Q1 FY12 and 30% in Q4 FY11). Growth in large corporate segment (3.6% qoq and 25% yoy) continues to be better than overall bank. Deposits growth remained buoyant, better than advances, at 5.5% qoq (25% yoy) mainly driven by substantial mobilization of retail TDs (9% qoq) due to high rates offered. Share of bulk deposits declined marginally to 23.7% while CASA share was lower by nearly 100bps at 36%. The C/D ratio deteriorated for yet another quarter to 73%. On account of modest credit expansion in H1 FY12, we believe that it would be difficult for PNB to grow ahead of the system in FY12.


NIM expansion was better than expected; guidance factors some margin compression   

PNBs NIM improved sequentially by 11bps to 4% driven by significant improvement in YoA (50bps) and contained increase in CoD (20bps qoq). Yield improvement was aided by material lending rate hikes before and during the quarter and lower-than-expected increase in deposits cost could have been driven by beneficial re-pricing on bulk deposits. Management guidance on NIM continues to be conservative at 3.5% implying that bank would be hesitant in passing further funding cost increases and also higher emphasis to be laid on growth going ahead. 


Core fee income declines sharply on sequential basis; C/I ratio deteriorates

Driven by lower processing fees and muted LC/LG income (both impacted by modest credit expansion in H1), core fee income of the bank declined by sharp 18% qoq. Trading profit (Rs530mn) was nearly flat on sequential basis while recovery in written-off accounts was significantly lower (Rs0.8bn v/s Rs1.1bn). Overall opex growth was modest at 5% qoq despite the sharp increase in non-employee cost. C/I ratio deteriorated by 80bps qoq to 41.8% on account of low

BSE 931.50 [24.90]([2.60]%)
NSE 932.45 [23]([2.41]%)
As on: 01 Jan 70, 05:30

***Note: This is a BSE Chart









 

 
 
 
Recent Reports
News