Punjab National Bank Q4 Results Review - Earnings Traction Remains Healthy: Motilal Oswal

Motilal Oswal Report

Punjab National Bank Ltd. reported a Q4 FY24 profit after tax of Rs 30.1 billion (5% beat), led by controlled provisions and robust other income. Opex was elevated and led to a 10% miss on pre-provision operating profit.

Net interest income grew 9% YoY to Rs 104 billion (in line), while net interest margin contracted 5 bp QoQ to 3.1% (3.25% domestic).

Loan book grew 12% YoY (2% QoQ) to Rs 9.3 trillion, led by a healthy traction in retail loans (3.9% QoQ growth). The credit/deposit ratio remained low at 68%, thus generating a lever to accelerate advances, unlike other banks. The current account and savings account ratio moderated 103 bp QoQ to 41.4% during the quarter.

Slippages increased marginally to Rs 22 billion (1.1% annualized), while healthy recovery and upgrades enabled an overall decline in gross/net non-performing asset ratios to 5.73%/0.73%. Provision coverage ratio improved 254 bp QoQ to 88% in Q4 FY24.

We raise our earnings per share estimates by 7%/5% for FY25/FY26, factoring in lower provisions, healthy other income, and steady margins.

We estimate an return on asset/return on equity of 0.8%/12.8% in FY25 and 1.0%/14.5% in FY26. Reiterate Neutral with a revised target price of Rs 130 (premised on 1.1 times FY26E adjusted book value).

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