PNB share price: Q4 result DETAILS highlighted for investors; check TARGET

Sharekhan says that Punjab National Bank posted weak results with operational performance coming below expectations and disappointing asset quality performance. The Net Interest Income (NII) came at Rs 6937 cr, was down 16.3% qoq and was below expectations. The PAT came in at Rs 586 cr, up 15.9% QOQ (there was a Loss in Q4 FY2020) but was still below expectations, mainly due to lower topline due to high slippages. The NIM fell sharply to just 2.88% from 3.09% in Q3 FY2021, and were down -21 bps QoQ on the back of Highest ever Quarterly Slippages of Rs 24,172 cr from Rs 1,150 cr in Q3 FY2021. Asset Quality performance was a dampener with the bank seeing high slippages. For FY2021, PNB saw 4.2% slippages and 2.8% credit costs, and its performance was weaker as compared to several peers.

Punjab National Bank has 5% of loans under SMA-2, driven by MSME/retail segments even as recent regulatory support may help absorb some of the pain. The reported basis GNPA/NNPA stood at 14.12% / 5.73% from 12.99% / 4.03% in the Q3 FY2021 levels. However, seen on comparison on a proforma basis, which stood at 14.71% / 5.65% the asset quality position has been mixed. The Provision Coverage Ratio (PCR) even though has deteriorated at 80.14% (down 502 bps QoQ) is still high and is a consolation. Further, the bank has Rs 60382 cr classified as Doubtful (which is ~8.2% of Loan Book).

See Zee Business Live TV Streaming Below:

Sharekhan believes that the headwinds due to asset quality issues are likely to keep performance muted for the medium term for the bank. However, the Capital position has improved, even as the outlook on collections and slippages is still unclear due to the evolving situation on pandemic and the elongated restructuring pipeline. Sharekhan have fine-tuned their estimates and the target multiple. Sharekhan maintains Hold rating with a revised price target of Rs 48. 

Punjab National Bank Key positives:

Healthy traction with CASA growth at 11% yoy, was driven by strong growth in savings deposits (12% yoy) and CASA ratio has also improved to 45%. The improved capital position, as PNB improved its CET-1 ratio to 10.6%.

Punjab National Bank Key negatives:

PNB saw high slippages as dampeners. For FY2021, PNB saw 4.2% slippages and 2.8% credit costs, and the performance is weaker compared to peers. PNB’s SMA-2 loans (incl loans below Rs 5 cr) even though have declined, but still remain at elevated high levels at 5% of total book.

Punjab National Bank Key Risks:

 An elongated or prolonged economic recovery or further stress due to the pandemic may result in a spike in NPAs and may affect profitability