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R e s u l t s b e t t e r t h a n e x p e c t e d …
Punjab National Bank’s (PNB) Q1FY12 results were better than expected
especially on the NII and asset quality front. Deposits grew 26.9% YoY
(3.6% QoQ) while credit growth was 23.4% (flat QoQ). NII grew 19% YoY
to | 3116 crore while NIM hit only 7 bps QoQ at 3.84% (better than
expected). Other income was healthy at | 1084 crore (up 21.5% YoY)
driven by strong fee income and recoveries high at | 109 crore. Opex
continued to remain high as the bank provided | 327 crore as current
pension obligation and amortised | 166 crore from the remaining | 2659
crore of second pension option and enhanced gratuity ceiling. Although
GNPA inched up 21 bps QoQ to 2% it was still below our expectation.
Credit costs remained high with the bank providing | 329 crore for
changed RBI norms. PNB is also buying a 30% stake in MetLife India to
boost its third-party income. We expect 20% CAGR in business to drive
PAT at 22% CAGR over FY11-13E.
ƒ NIM resilient this quarter, rising CoD to pressurise NIM, going ahead
NIM was protected at 3.84% with costs being passed on, reflected in
YoA rising 55 bps QoQ to 11.38% in response to a 64 bps QoQ hike
in CoD at 6.28%. CASA declined 110 bps QoQ to 38.1% with share
of bulk deposits rising to 24%, which would translate into higher
CoD & subsequently lower NIM. We see NIM @ 3.5% for FY12E.
ƒ Asset quality to remain under pressure…
GNPA inched up 12% QoQ to | 4894 crore (GNPA ratio @ 2%) while
NNPA rose 3% QoQ to | 2091 crore (NNPA ratio @ 0.86%) with PCR
at 74.3%. Although slippages were high at | 1177 crore, reductions
of | 663 crore with recoveries and upgradations of | 655 crore and
lower w/offs at | 11 crore was a positive. We have factored in higher
slippages and provisions as accounts < | 10 lakh are yet to shift to
system based NPA recognition. Even though GNPA ratio at 2% was
better than expected, we expect the delinquency ratio to remain
high in FY12E and see GNPA@1.9% and NNPA@ 0.8% by FY13E.
V a l u a t i o n
PNB is not only focusing on NII and core fee income growth, it is aiming
at higher recoveries to offset incremental slippages. However, we expect
pressure on NIM and higher incremental slippages in Q2FY11. Return
ratios will remain healthy with RoA of 1.4% and RoE of 23% by FY13E.
We maintain our target price at | 1255 (valued at 1.4x FY13E ABV)
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
R e s u l t s b e t t e r t h a n e x p e c t e d …
Punjab National Bank’s (PNB) Q1FY12 results were better than expected
especially on the NII and asset quality front. Deposits grew 26.9% YoY
(3.6% QoQ) while credit growth was 23.4% (flat QoQ). NII grew 19% YoY
to | 3116 crore while NIM hit only 7 bps QoQ at 3.84% (better than
expected). Other income was healthy at | 1084 crore (up 21.5% YoY)
driven by strong fee income and recoveries high at | 109 crore. Opex
continued to remain high as the bank provided | 327 crore as current
pension obligation and amortised | 166 crore from the remaining | 2659
crore of second pension option and enhanced gratuity ceiling. Although
GNPA inched up 21 bps QoQ to 2% it was still below our expectation.
Credit costs remained high with the bank providing | 329 crore for
changed RBI norms. PNB is also buying a 30% stake in MetLife India to
boost its third-party income. We expect 20% CAGR in business to drive
PAT at 22% CAGR over FY11-13E.
ƒ NIM resilient this quarter, rising CoD to pressurise NIM, going ahead
NIM was protected at 3.84% with costs being passed on, reflected in
YoA rising 55 bps QoQ to 11.38% in response to a 64 bps QoQ hike
in CoD at 6.28%. CASA declined 110 bps QoQ to 38.1% with share
of bulk deposits rising to 24%, which would translate into higher
CoD & subsequently lower NIM. We see NIM @ 3.5% for FY12E.
ƒ Asset quality to remain under pressure…
GNPA inched up 12% QoQ to | 4894 crore (GNPA ratio @ 2%) while
NNPA rose 3% QoQ to | 2091 crore (NNPA ratio @ 0.86%) with PCR
at 74.3%. Although slippages were high at | 1177 crore, reductions
of | 663 crore with recoveries and upgradations of | 655 crore and
lower w/offs at | 11 crore was a positive. We have factored in higher
slippages and provisions as accounts < | 10 lakh are yet to shift to
system based NPA recognition. Even though GNPA ratio at 2% was
better than expected, we expect the delinquency ratio to remain
high in FY12E and see GNPA@1.9% and NNPA@ 0.8% by FY13E.
V a l u a t i o n
PNB is not only focusing on NII and core fee income growth, it is aiming
at higher recoveries to offset incremental slippages. However, we expect
pressure on NIM and higher incremental slippages in Q2FY11. Return
ratios will remain healthy with RoA of 1.4% and RoE of 23% by FY13E.
We maintain our target price at | 1255 (valued at 1.4x FY13E ABV)
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