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Punjab National Bank
2Q earnings in line; comfort on
asset quality; Reiterate Buy
2Q: Earnings exactly in line, but +5-6% better than Street
PNB reported earnings of Rs12.1bn (exactly in line), up +12% yoy. This is after
PNB made higher-than-required MTM provisions on its investment book. The
book is now hedged up to 8.7% yields. Top line grew 16% yoy (7% ahead),
driven by 19% loan growth. However, margins are down 11bps yoy (up 11bps
qoq) to 4.0%. Disappointment was fee growth (core), which grew only 6% yoy,
and CASA, which is down 430bps yoy (100bps qoq) to ~36%. Tier 1 is
comfortable at ~9.3%.
Restructured loans shoot up, but slippage (net) trend down
While the bank's restructured loans showed a +25% jump qoq (by Rs41bn), we
believe asset quality is very manageable. The bulk of the restructured increase
qoq came from the power sector (Rs18bn is restructuring of Tamil Nadu Electricity
Board) and Rs6.5bn from Aban. But reported slippages (net of recoveries) came
in below our run-rate (~Rs7bn/qtr) and also down ~50% qoq, to Rs2.7bn (~0.5%
of 1-yr lag loans). We still est. net slippages at ~Rs28/37bn in FY12/13, but asset
quality should remain manageable, with provision cover est. at +74-75%.
Risk-return very attractive; Preferred pick
We have marginally tweaked our earnings (<1%) for FY12/13; hence, we still
estimate PNB’s earnings growth to sustain at +16/22% through FY12/13. Riskreturn
remains very attractive, with PNB trading at 1.2x FY13 book, with RoEs of
~22%. Hence, We reiterate Buy and PO; Preferred pick (ex SBI) in govt. space.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Punjab National Bank
2Q earnings in line; comfort on
asset quality; Reiterate Buy
2Q: Earnings exactly in line, but +5-6% better than Street
PNB reported earnings of Rs12.1bn (exactly in line), up +12% yoy. This is after
PNB made higher-than-required MTM provisions on its investment book. The
book is now hedged up to 8.7% yields. Top line grew 16% yoy (7% ahead),
driven by 19% loan growth. However, margins are down 11bps yoy (up 11bps
qoq) to 4.0%. Disappointment was fee growth (core), which grew only 6% yoy,
and CASA, which is down 430bps yoy (100bps qoq) to ~36%. Tier 1 is
comfortable at ~9.3%.
Restructured loans shoot up, but slippage (net) trend down
While the bank's restructured loans showed a +25% jump qoq (by Rs41bn), we
believe asset quality is very manageable. The bulk of the restructured increase
qoq came from the power sector (Rs18bn is restructuring of Tamil Nadu Electricity
Board) and Rs6.5bn from Aban. But reported slippages (net of recoveries) came
in below our run-rate (~Rs7bn/qtr) and also down ~50% qoq, to Rs2.7bn (~0.5%
of 1-yr lag loans). We still est. net slippages at ~Rs28/37bn in FY12/13, but asset
quality should remain manageable, with provision cover est. at +74-75%.
Risk-return very attractive; Preferred pick
We have marginally tweaked our earnings (<1%) for FY12/13; hence, we still
estimate PNB’s earnings growth to sustain at +16/22% through FY12/13. Riskreturn
remains very attractive, with PNB trading at 1.2x FY13 book, with RoEs of
~22%. Hence, We reiterate Buy and PO; Preferred pick (ex SBI) in govt. space.
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