Punjab National Bank share price target

Punjab National Bank (PNB) has come out with a disappointing set of numbers for 3QFY2016. Although we had expected the results to be unimpressive, but the quantum of rise in the Gross NPAs has surprised us. The bank reported a PAT of only Rs. 51cr for the quarter despite a tax write back of Rs. 908cr. Loan growth remained subdued; NIM under pressure: For the quarter, advances growth at 8.4% yoy remained subdued, while deposit growth was decent at 13.3% yoy. CASA deposits grew by 14.3% yoy with Current deposits growing by 22.9% yoy and Savings deposits growing by 12.5% yoy. The CASA ratio stood at 40.4%. The NIM for the quarter declined by 22bp qoq to 2.75% due to lower yield on advances, which is largely due to base rate cuts. Provisions doubled to Rs. 3,775cr compared to Rs. 1,882cr in the sequential previous quarter, resulting in a loss at the PBT level to the tune of Rs. 857cr. The bank got a tax write back of Rs. 908cr; as a result the bank generated a PAT of Rs. 51cr for the quarter. Sharp deterioration in asset quality: Asset quality deteriorated sharply during the quarter with gross slippages of...

8 Asset quality deteriorated sharply with GNPA increasing 211bps qoq, while NNPA increased187bpsqoqto5.86%.SlippagesamountedtoRs127bnvs.Rs26bninQ2FY16. 8 NIMdeclined34bpsyoyto2.87%,asyieldsdeclinedby39bpsduetointerestreversal....

Punjab National Bank (PNB) negatively surprised us on both earnings and asset quality fronts in 3Q, primarily due to higher slippages as the bank recognised impairment as well as the ensuing provisioning impact of the asset reclassification in accordance with ongoing RBI's evaluation. Slippages came in quite high at Rs127bn (annualized ratio of 13.4%) v/s Rs26bn (2.7%) in 2QFY16 and Rs46bn (5.1%) in 3QFY15. As a result, the bank reported a higher chunk for provision of Rs37.8bn, an increase of 157% yoy and 101% qoq. GNPA increased 211bps qoq to 8.47% and NNPA increased by 187bps qoq to 5.86%. Consequently, PCR decreased to 33.1% v/s 39.1% in 2QFY16...

Punjab National Bank (PNB) reported a mixed set of numbers for 2QFY2016 with subdued operating performance, while its asset quality improved marginally. Loan growth remains modest; NIM improves qoq During 2QFY2016, advances and deposits grew by 6.7% and 14.0% yoy, respectively, with the CD ratio at 70.6%. Domestic advances growth was sluggish at 6.3% yoy, while international advances saw a modest growth of 9.5% yoy. In domestic advances, the retail loan book grew by 23.0% yoy, aided by 27.6% yoy growth in housing segment. Industry loans growth was modest at 7.6% yoy as the bank was cautious lending to the large industry segment. CASA deposits grew by 13.4% yoy with Current deposits growing by 25.0% yoy. The NIM improved by 7bp qoq to 2.97%, due to higher yields. Other income (excl. treasury) was weak witnessing a decline of 12.9% yoy due to a decline seen in both fee income and recoveries. Asset quality improved for the second consecutive quarter as the Gross NPA ratio decreased by 11bp qoq to 6.36%, while the Net NPA also drifted downwards by 6bp qoq to 3.99%. The bank reported the second quarter of consecutive significant decline in slippages on a qoq basis to `2,613cr...

Gradual recovery in asset quality; Upgrade to NEUTRAL Punjab National Bank's (PNB) 2Q net profit stood higher than our and street estimates led by the lower slippages along with significant improvement in NII, recovery from written-off account and treasury income. Fresh slippages declined sequentially to Rs26.1bn (slippage ratio of 2.7%) v/s Rs33.7bn (slippage ratio of 3.6%) in 1QFY16 and Rs36.2bn (slippage ratio of 4.2%) in 2QFY15. PNB is gradually showing improvement on asset quality front and hence we upgrade to NEUTRAL from SELL on the stock...

PNB's Q2FY16 results were below estimates as the earnings grew by 7.9% YoY (-13.8% QoQ) to Rs 6.2 bn led by weak NII growth (-6.3% YoY) and lower non- interest income. NIMs improved by 7 bps QoQ to 2.97%. The only silver lining in the result came in asset quality which improved marginally. GNPA and NNPA declined to 6.36% and 3.99% vs 6.47% and 4.05% respectively in Q1FY16.

PNB positively surprised with lower gross stressed asset additions of Rs 40.6bn (4.1% ann. vs. 4.9/15.7% YoY/QoQ). Further, higher recoveries & upgrades (Rs 23bn) coupled with controlled slippages (Rs 34bn, 3.6% ann. vs. 7.7% QoQ) led to stable asset quality. PCR (59.3%) too improved sequentially.

PNB's Q1FY16 results were below estimates as the earnings declined by 49% YoY (135% QoQ growth due to lower base) to Rs 7.2 bn led by weak NII growth (-6.3% YoY) and higher provision expenses. NIMs improved by 11 bps QoQ to 2.9%. Only positive came in from asset quality which improved marginally after 5 quarters of sequential deterioration. GNPA and NNPA declined to 6.47% and 4.05% vs 6.55% and 4.06% respectively in Q4FY15.