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Motilal Oswal Report
Punjab National Bank reported a healthy quarter, with a 19% beat on profit after tax amid 23% lower provision versus our estimate. Profit after tax surged 254% YoY to Rs 22.2 billion, while net interest income grew 12% YoY (in line) to Rs 103 billion as net interest margins improved 4 basis points QoQ to 3.15% in Q3 FY24.
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Loan book grew at a healthy pace of 15% YoY (3% QoQ) to Rs 9.2 trillion, led by a healthy traction in corporate. Retail loans declined 1.8% QoQ. Deposit growth was relatively low at 9% YoY/1% QoQ to Rs 13 trillion.
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Punjab National Bank's credit/deposit ratio was relatively low at 69%, giving levers to accelerate advances unlike other banks. The current account and savings account ratio increased 32 bp QoQ to 42.5%.
Slippages dipped to Rs 18 billion (0.9% annualised) enabling sharp 72 bp/51 bp QoQ decline in gross /net non-performing asset ratios to 6.24%/0.96% while provision coverage ratio rose 540 bp QoQ to 85%.
We upgrade our earnings per share estimates by 15%/5% for FY24/FY25, factoring in lower LLP and healthy margins.
We estimate return on asset/return on equity of 0.7%/11.0% in FY25 and 0.9%/13.1% by FY26. Retain Neutral with a target price of Rs 100 (one time September-25E adjusted book value).
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