[T.S.R:17376] PNB-Systematic Fudging of NPAs, EPS and Book Value

Punjab National Bank-High Loan Slippage, 73 per cent coverage and weakest Tier I Capital Amongst PSU Banks

Slippages still high, capital adequacy just about sufficient. Gross NPAs fell 3.6% qoq, but fresh NPA slippages (2% annualized) were high in Q4FY11. Also, restructured loans increased 6.6% qoq to  Rs 153bn (6.3% of loans). PNB has NPA coverage of 73 per cent. 

Since tier-1 capital is just sufficient at 8.44%, the bank would need to raise capital to support business growth, in our view. PNB's large restructured book and stretched tier-1 are likely to be an overhang for PNB's short-term stock performance. 

 Healthy business growth, NIM declines. Advances and deposits grew 29.7% yoy and 25.5% yoy respectively. Despite a steady CASA share of 39.1%, NIM declined 22bps qoq to 3.91%. The bank's credit-to-deposits is a high 77.4% and is likely to fall below 75% over FY12-13e, limiting scope for NIM expansion. 

Risks; Higher credit costs on lower-than-expected NPA recoveries; slower growth in low-cost deposits.

 

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

 

 

 

 

 

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