PNB Quarterly Results: PNB Q4 earnings turn around after amalgamation, asset quality concerns remain

Last updated: 09 Jun, 2021 | 02:19 pm

PNB Quarterly Results: PNB Q4 earnings turn around after amalgamation, asset quality concerns remain

PNB’s bottomline turns around: Punjab National Bank has turned in a profit of Rs 701 cr as compared to a net loss of Rs 821 cr, aided by a sharp rise in revenues after amalgamation of United Bank of India and Oriental Bank of Commerce with the bank. 

Net Interest income rises: A bank’s primary business is to borrow money and lend the same at a rate higher than the rate at which they borrowed. The income generated from this differential is known as net interest income. Net interest income for Punjab National Bank grew  rose 50% to Rs 7,072 crore for the period under review.  It was Rs 4,677 crore in the same quarter a year earlier.

Asset quality woes: PNB's continues to struggle with asset quality concerns. Gross NPAs at 14.12%, are much higher than all of its peers. However, net NPAs at 5.73% indicates that the bank has provided for a majority of these bad loans. Capital adequacy (at 14.32%) is above the statutory requirement of (12%). However, the bank is likely to be hungry for capital to shore up its Tier-1 base capital (currently at 10.61%).

Provisions: Provisioning for bad loans during the March quarter rose to Rs 5,293.89 crore compared to Rs 4,618.27 crore in the previous year. However, provision other than tax and contingencies declined to Rs 4,686.04 crore from Rs 4,901.31 crore.

Outlook: Following the results, global brokerage firm Jefferies has maintained an ‘Underperform’ rating on Punjab National Bank shares with a target price of Rs 33. The firm noted that while the bottomline was slightly ahead of estimates, the asset quality metrics were weaker with slippages. PNB’s plan to sell written-off loans to new ARC (Asset Reconstruction Company) can lift estimates in the upcoming quarter. However, analysts have trimmed estimates and continue to maintain a cautious view.

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