PNB Q2 Net Profit Slips 11%, Asset Quality Improves

PNB Q2 numbers performed well against the analysts

expectation. Specifically the asset quality which is much better
than what it was anticipated. So, asset quality has been stable. It
has been surprising on the bottom-line. It will see muted loan
growth in the next few quarters; the asset quality pressure will
start reducing on the balance sheet. Loan growth for the bank will
hopefully start going up in the next financial year.

Glimpses of Q2
Punjab National Bank (PNB) has registered a 11.5 % degrowth in the Q2 profit at Rs 549.4
crore, affected by higher provisions and lower NII but it was ahead of estimates because of
treasury income. Asset quality also improved during this quarter but credit growth was
muted. Net interest income slipped 10.2 % Y-o-Y to Rs 3,879.85 crore in July-September
quarter on account of muted credit growth.
The bank said advances (loan) during the quarter increased by 3.35 % to Rs 3.93 lakh
crore and deposits rose 6.5 % to Rs 5.74 lakh crore as compared with same quarter of last
financial year. Profit as well as net interest income was better than anticipated. According
to analysts, profit was anticipated at Rs 417 crore and net interest income at Rs 3,765 crore
for the quarter. Other income or non-interest income during the quarter increased by 76 %
to Rs 2,387.91 crore and operating profit increased 12.7 % to Rs 3,312.04 crore compared
with year-ago period.

PNB's asset quality

Asset quality has seen an improvement in the quarter gone by as gross non-performing

assets (NPA) as a percentage of gross advances slipped 12 basis points to 13.63 % and net
NPAs reduced 6 bps to 9.10 % on sequential basis. In absolute terms, gross NPAs dipped
0.3 % Q-o-Q to Rs 56,465.63 crore and net NPAs FELL 0.02 % to Rs 35,722.32 crore in
Q2 on the back of further fall in slippages.
Slippages were seen down to Rs 5,089 crore in the second quarter FY17 as compared with
Rs 7,533 crore in Q1FY17 and Rs 23,545 crore in Q4FY16. The constant endeavor is to
slash stressed assets, Usha Ananthasubramanian, MD & CEO, PNB mentioned. She
further added that recoveries were around Rs 4,800 crore and among, cash recovery was at
Rs 2,883 crore in Q2FY17. The June quarter had faced recoveries of Rs 6,006 crore, of
which cash recovery was Rs 4,825 crore. Capital adequacy ratio during second quarter,
too, improved from 11.58 % in June quarter to 11.65 % in September quarter. Provisions
hiked 34.6 % Y-o-Y to Rs 2,533.8 crore in July-September quarter of FY17 but
sequentially declined 7.5 %. Provisioning coverage ratio as on September 2016 worked out
to 53.32 % against 52.5 % in June 2016.
It was expected by analyst that the stock would move positively in trade on Monday. As it
was anticipated, while trading session commenced on 7th Nov, PNB share price opened
above 5% at Rs. 139.10.

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Article Written by
Madhurima Chowdhury