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Informist, Wednesday, Jan. 29, 2025

By Shubham Rana

NEW DELHI – Punjab National Bank is expected to report another sharp rise in its net profit as the Delhi-based lender continues to bring down provisions.

The bank's net profit is seen increasing 68.6% on year to INR 37.48 billion for Oct-Dec, according to an average of estimates from eight brokerage houses. Sequentially, however, the net profit is seen declining 12.9%. The bank's net profit had risen 145.1% on year to INR 43.03 billion during Jul-Sept as provisions fell.

The estimates from brokerages for Punjab National Bank's net profit ranged from INR 24.33 billion to INR 45.60 billion. The bank will detail its financial results for Oct-Dec on Friday.

Motilal Oswal Financial Services expects the bank's provisions to fall to INR 7.9 billion in Oct-Dec from INR 27.4 billion a year ago. Loan-loss provisions are seen falling 73% on year to INR 8.06 billion, according to Kotak Institutional Equities.

"We expect the bank to report modest operating profit growth and this, along with a decline in provisions, will result in strong earnings growth," Kotak Institutional Equities said in a pre-earnings note. The bank's operating profit is seen growing 4% on year during Oct-Dec to INR 65.60 billion, the brokerage said.

The bank's net interest income--the difference between interest earned and expended--is seen rising 5.2% on year to INR 108.33 billion, as per the average of estimates from eight brokerages. The net interest income was INR 105.17 billion in Jul-Sept.

Sequentially, net interest income is seen 3.0% higher. As per the provisional data released by the bank, global advances rose 15.0% on year to INR 11.12 trillion as of Dec. 31. The bank's global deposits increased 15.6% on year to INR 15.30 trillion as of Dec. 31.

The net interest margin of the bank is seen slightly lower in Oct-Dec from the previous quarter. The bank's global net interest margin during Jul-Sept was 2.92%.

"NIM is likely to be marginally lower quarter-on-quarter, driven by marginal increase in cost of funds," Kotak Institutional Equities said. PNB had raised its marginal cost of funds based lending rate by 5 basis points across all tenors in December.

ASSET QUALITY

Punjab National Bank's asset quality is expected to have improved slightly in Oct-Dec, brokerages said.

Elara Securities sees the bank's gross non-performing ratio to moderate to 4.4% from 4.5% as of Sept. 30. The bank's net non-performing asset ratio is seen at around 0.5% as of Dec. 31, the same as at the end of September. In October, the bank lowered its guidance on gross non-performing assets ratio to 3.50-3.75% by March-end as against the 4.00% mark previously expected.  

"We expect credit cost to be lower than other Tier-2 PSU (public sector undertaking) banks because net NPL (non-performing loans), ratio is lower," Kotak said. Credit cost is seen around 0.3-0.5% in Oct-Dec.

The key monitorables for the bank would be its outlook on business growth, margins, credit costs, and recoveries on bad loans, brokerages said.

Following are the Oct-Dec earnings estimates for Punjab National Bank based on reports from eight brokerage firms in descending order of the estimate of net profit:

End

Edited by Deepshikha Bhardwaj

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