MOSL: PUNJAB NATIONAL BANK (Buy)-Loan growth revives-higher provisions remain a drag on earnings
Punjab National Bank: Loan growth revives; higher provisions remain a drag on earnings
(PNB IN, Mkt Cap USD6.7b, CMP INR160, TP INR215, 37% Upside, Buy)
- PNB reported PPoP of INR42.4b (+29.5%/52.7% QoQ/YoY; in-line), supported by higher-than-expected other income (11% beat, even after considering PNBHF stake sale gains) and lower-than-expected opex due to controlled employee expense. Provisions of INR44.7b (35% higher) led to PBT loss of INR2.2b.
- Slippages moderated to INR31.7b (2.8% annualized), but strong loan growth enabled 121bp/89bp QoQ improvement in the GNPL/NNPL ratios. Coverage ratio stood largely unchanged at 40.8%. PNB needs to make total additional provisions of INR10.58b toward NCLT in 4QFY18. Stressed assets stood at INR671.3b (14.1% of advances) v/s INR728.5b as on 3QFY17.
- Domestic NIM for 9MFY18 shrunk 17bp YoY to 2.59%, with a 30bp decline in cost of funds and a 42bp decline in yield on advances YoY. Loan book grew 10%/17% QoQ/YoY, driven by retail, agri and MSME loans. Retail loans grew 5%/22% QoQ/YoY, driven by 22% YoY growth in housing loans.
- Other highlights: a) CASA deposits grew 1.9% YoY, while average CASA ratio stood at ~42.9% v/s 40.8% a year ago. b) Other income growth was strong at 44% YoY. c) CAR ratio stood at 11.58% (+2bp QoQ), while CET-1 ratio increased to 8.05% (+38bp QoQ), led by QIP inflows of INR50b and stake sale gains from PNB Housing Finance.
Punjab National Bank is a commercial banking group based in India. Co. is engaged in offering its customers personal, social, agricultural, international and corporate banking services. Co. specialized in offering commercial banking, retail banking, SME banking, rural banking, transaction banking, merchant banking, financial inclusion, credit syndication, treasury, internet & mobile banking services. Co. maintains over 6,300 branches and 7,900 ATMs across 764 cities. Co. has a banking subsidiary in the U.K., as well as branches in Hong Kong, Dubai and Kabul. Co. maintains representative offices in Almaty (Kazakhstan), Dubai, Shanghai (China), Oslo (Norway) and Sydney (Australia).
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