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R e s t r u c t u r e d b o o k o v e r s h a d o w s a g o o d s h o w …
Punjab National Bank (PNB) reported strong numbers in Q2FY12.
However, fresh restructuring of | 4563 crore in H1FY12 with | 1715 crore
from TNSEB* (total power restructuring: | 2151 crore) deepens our
concern on asset quality. GNPA increased 5% QoQ to | 5150 crore with
slippages at | 993 crore and reductions at | 773 crore. The bank migrated
loans below | 10 lakh to system based NPA recognition leading to
slippages of | 430 crore, thus completing its migration process. Deposits
grew 25% YoY to | 3,41,783 crore while advances rose 19.3% YoY to |
2,49,020 crore with a strong spurt in overseas advances at 66.7% YoY.
Profits beat our expectation at | 1205 crore (our estimate: | 1027 crore),
up 12% YoY driven by stronger NII at | 3453 crore (I-direct estimate: |
3174 crore) and NIM rising 11 bps QoQ to 3.95%. We expect 20% CAGR
in business to drive PAT at 18% CAGR over FY11-13E.
ƒ CASA slides to 37%, margins stronger at 3.95%...
CASA, which once treaded above 40% till Q2FY11, slid another 100
bps to 37% this quarter while share of bulk deposits was stable at
23.7%. NIM surprisingly climbed 11 bps QoQ to 3.95% with YoA
rising 54 bps QoQ to 11.92% and CoD inching up only 24 bps QoQ
to 6.52%. We expect pressure on NIM in H2FY12E on account of
rising costs leading to NIM moderating to 3.5% for FY12E.
ƒ Other income sluggish, opex and provision for taxes higher…
Other income declined 18% QoQ to | 889 crore due to lower
processing fee income (generally higher in the first quarter). Opex
grew 5.1% QoQ due to ~| 500 crore provided for previous and
current obligation for second pension option & gratuity liability. Total
provisions were lower QoQ but provision for tax was high at | 613
crore. The bank also provided | 161 crore for investment
depreciation (SLR at 28.4%) covering for yields up to 8.62%.
V a l u a t i o n
PNB has delivered on the core business front in H1FY12 with strong
margins and higher-than-expected NII growth. However, rising costs
coupled with high restructured assets would pressurise H2FY12 PAT
growth. While higher recoveries remain the key to asset quality
improvement, higher slippages cannot be ruled out. We maintain our
target price at | 1050 (1.2x FY13E ABV) and recommend a HOLD rating on
the stock
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
R e s t r u c t u r e d b o o k o v e r s h a d o w s a g o o d s h o w …
Punjab National Bank (PNB) reported strong numbers in Q2FY12.
However, fresh restructuring of | 4563 crore in H1FY12 with | 1715 crore
from TNSEB* (total power restructuring: | 2151 crore) deepens our
concern on asset quality. GNPA increased 5% QoQ to | 5150 crore with
slippages at | 993 crore and reductions at | 773 crore. The bank migrated
loans below | 10 lakh to system based NPA recognition leading to
slippages of | 430 crore, thus completing its migration process. Deposits
grew 25% YoY to | 3,41,783 crore while advances rose 19.3% YoY to |
2,49,020 crore with a strong spurt in overseas advances at 66.7% YoY.
Profits beat our expectation at | 1205 crore (our estimate: | 1027 crore),
up 12% YoY driven by stronger NII at | 3453 crore (I-direct estimate: |
3174 crore) and NIM rising 11 bps QoQ to 3.95%. We expect 20% CAGR
in business to drive PAT at 18% CAGR over FY11-13E.
ƒ CASA slides to 37%, margins stronger at 3.95%...
CASA, which once treaded above 40% till Q2FY11, slid another 100
bps to 37% this quarter while share of bulk deposits was stable at
23.7%. NIM surprisingly climbed 11 bps QoQ to 3.95% with YoA
rising 54 bps QoQ to 11.92% and CoD inching up only 24 bps QoQ
to 6.52%. We expect pressure on NIM in H2FY12E on account of
rising costs leading to NIM moderating to 3.5% for FY12E.
ƒ Other income sluggish, opex and provision for taxes higher…
Other income declined 18% QoQ to | 889 crore due to lower
processing fee income (generally higher in the first quarter). Opex
grew 5.1% QoQ due to ~| 500 crore provided for previous and
current obligation for second pension option & gratuity liability. Total
provisions were lower QoQ but provision for tax was high at | 613
crore. The bank also provided | 161 crore for investment
depreciation (SLR at 28.4%) covering for yields up to 8.62%.
V a l u a t i o n
PNB has delivered on the core business front in H1FY12 with strong
margins and higher-than-expected NII growth. However, rising costs
coupled with high restructured assets would pressurise H2FY12 PAT
growth. While higher recoveries remain the key to asset quality
improvement, higher slippages cannot be ruled out. We maintain our
target price at | 1050 (1.2x FY13E ABV) and recommend a HOLD rating on
the stock
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