EUR 120.00 For Business Accounts Only

MOSL: PUNJAB NATIONAL BANK (Neutral)-Sees a recovery in operating performance; remains watchful of asset quality

PUNJAB NATIONAL BANK: Sees a recovery in operating performance; remains watchful of asset quality

(PNB IN, Mkt Cap USD6b, CMP INR40, TP INR45, 12% Upside, Neutral)

 

Slippages remain elevated

• PNB reported a healthy performance, supported by a pick-up in NII and lower opex, even as provisions stood stable sequentially. Business growth remains under pressure, with a sequential decline in loans/deposits. However, margin witnessed ~5bp QoQ improvement to 2.73%.
• Slippages stood elevated (~6.2% annualized), led by the RAM segment. However, higher recoveries and upgradations limited the decline in asset quality ratios. Total restructured book stands ~2.02% of loans, while total SMA 1 and 2 stands elevated at 3.9%. While we expect asset quality outlook to improve, led by moderation in slippages/credit cost, subdued loan growth, higher SMA, and restructuring book keeps us watchful over the near term. We estimate a RoA/RoE of 0.6%/8.8% by FY23E and resume coverage with a Neutral rating.

 Business growth muted; operating performance showing a recovery

• PNB reported a PAT of INR10.2b (+232% YoY/75% QoQ), aided by pick-up in NII, lower opex, and controlled provisions. NII grew 6.6% YoY and 4% QoQ to INR72.3b, with margin expanding by 5bp QoQ to 2.73%.
• Core fee income was flat YoY, but grew 8% QoQ to INR15b. Total other income stood at INR35.9b supported by higher treasury gains (INR11.2b) and recovery from written of assets (INR8.3b).
• Opex declined by ~8% YoY to ~INR47.2b, resulting in a 360bp QoQ moderation in C/I ratio to 43.6%. Thus, PPOP grew 16% YoY to INR61b.