Punjab National Bank Q3 Review - Return Ratios To Remain Lower Despite Pick-Up In Recoveries: Nirmal Bang

Nirmal Bang Report

Punjab National Bank Q3 FY24 performance was better than our expectations, with net interest income/pre-provision operating profit/profit after tax coming in at a variation of 1.1%/-5.9%/6.8% versus our estimates.

Profit after tax grew by 253.5% YoY, led by loan growth of 12.9% YoY, 3 basis points QoQ expansion in net interest margin to 3.15% (aided by re-pricing and Rs 7 billion impact of interest recoveries on non performing assets recovered) and lower credit cost.

Despite AS-15 provision of Rs 3.2 billion and wage revision provision of Rs 8 billion (considering 17% hike and increase in pension component), staff costs were stable QoQ and down by 6.5% YoY due to base effect of AS-15 provisions done earlier.

After incorporating Q3 FY24 results and assuming further asset quality improvement due to continued recoveries from gross non-performing assets and written off accounts, we have raised our earnings estimates by 3.4%/25.4% for FY24E/FY25E.

However, despite these upward revisions, return of assets/return of equity would still remain lower at 0.8%/11.5% for FY25E and 0.8%/11.6% for FY26E.

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