Earnings Outlook
PNB Jul-Sept PAT seen doubling on yr on lower provisions
This story was originally published at 12:16 IST on 21 October 2024
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By Shubham Rana
NEW DELHI – Punjab National Bank is expected to report a sharp on-year jump in its net profit for the seventh quarter in a row in Jul-Sept because of a further fall in provisions. The public sector lender's net profit is seen surging 99.1% on year to INR 34.97 billion for the quarter ended September, according to an average of estimates from six brokerage houses. Sequentially, the net profit is seen rising 7.6%.
The estimates from brokerages for Punjab National Bank's net profit ranged from INR 28.26 billion to INR 39.44 billion. The lender has not yet notified the date of its earnings for Jul-Sept. In Apr-Jun, the bank had reported a 159.0% jump in its net profit to INR 32.52 billion because of a slump in provisions. Provisions and contingencies slid 66.9% on year to 13.12 bln rupees in Apr-Jun. The bank's provisions have been on the decline for eight consecutive quarters now.
Provisions are expected to have declined further in Jul-Sept, which will aid a rise in net profit along with a healthy operating profit, brokerages said. "We expect the bank to report strong operating profit growth, led by strong increase in non-interest income. A decline in provisions will further result in strong earnings growth," Kotak Institutional Equities said in a pre-earnings report.
The bank's net interest income--the difference between interest earned and expended--is seen rising 8.8% on year to INR 107.94 billion in Jul-Sept, as per the average of estimates from six brokerages. Sequentially, net interest income is seen 3.0% higher. As per the provisional data released by the bank, global advances rose 13.0% on year to INR 10.64 trillion as of Sept. 30. The bank’s global deposits increased 11.4% on year to INR 14.59 trillion as of Sept. 30.
MARGINS
Brokerages expect the bank's net interest margin to moderate, although slightly, in Jul-Sept. Kotak Institutional Equities expects the bank’s net interest margin to fall 7 basis points in Jul-Sept from 3.07% in the previous quarter. The net interest margin had declined 3 bps in Apr-Jun from a quarter ago.
The margin is likely to decline because of a “marginal increase in cost of funds”, the brokerage said. The bank in August had raised its interest rates for fixed deposits by up to 25 bps for amounts up to INR 30 million. Term deposits have the biggest share in Punjab National Bank’s deposit mix at 61.0%. Funding costs have been on the rise across the banking sector due to increasing deposit rates to fund the higher credit growth.
ASSET QUALITY
Punjab National Bank’s asset quality is expected to have improved in Jul-Sept, brokerages said. “We expect the bank to report healthy profitability aided by better credit growth and contained provisions, while slippages could be higher quarter-on-quarter due to recognition of MTNL as an NPA (non-performing asset),” Emkay Global Financial Services Ltd. said in a pre-earnings report.
The bank’s asset quality had improved in Apr-Jun as well. The gross non-performing asset ratio as on Jun. 30 was 4.98%, lower than 7.73% a year ago and 5.73% a quarter ago. The net NPA ratio was 0.60%, improving from 1.98% a year ago, and 0.73% a quarter ago.
Punjab National Bank’s credit cost is expected to be lower than other “Tier-2 PSU banks because net NPL (non-performing loan) ratio is lower”, Kotak Institutional Equities said. The bank aims to keep the gross NPA ratio to around 4% in 2024-25 (Apr-Mar), and the net NPA ratio below 0.5%. The key monitorables for the bank would be its outlook on business growth, margins, and credit costs, brokerages said.
At 1030 IST, shares of Punjab National Bank were down 0.1% at INR 103.12 on the National Stock Exchange of India Ltd. Following are the Jul-Sept earnings estimates for Punjab National Bank based on reports from six brokerage houses:
BROKERAGE | NET INTEREST INCOME (in INR million) | NET PROFIT (in INR million) |
Antique Stock Broking Ltd | 109,201.00 | 38,197.00 |
Emkay Global Financial Services Ltd | 106,234.00 | 33,968.00 |
Kotak Institutional Equities | 105,993.00 | 39,444.00 |
Motilal Oswal Financial Services | 108,995.00 | 34,615.00 |
Nirmal Bang Institutional Equities | 108,250.00 | 28,258.00 |
Sharekhan Ltd | 108,950.00 | 35,340.00 |
Average | 107,937.17 | 34,970.33 |
End
Edited by Namrata Rao
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