Reductions in gross and net NPLs, with stable fresh NPL formations were the
cornerstone of PNB’s Q4FY13 results. Fresh NPL formations of ` 29.6bn was
flat QoQ and was lower than what the street was expecting. While NPL upgrades
declined QoQ, NPL recoveries showed an improvement. Overall, gross and net
NPLs declined QoQ both on absolute and percentage basis. Coverage ratio
also improved moderately from 56% in Q3 to 59%.
The bank restructured ` 64bn of loans during the quarter, while ` 64bn of loans
were reduced from the restructured loans portfolio as per the RBI guidelines.
Total restructured loans stood at ` 321bn forming 10.4% of the total loans
book. The management does not see a major restructuring pipeline going forward.
Balance sheet growth slowed down with loan growth of 5% and deposit growth
of 3%, in line with the management’s strategy of de-risking the balance sheet.
On average basis though, loan and deposit growth was better at 13% and 15%
respectively.
NIM at 3.51% improved moderately QoQ, however the management has become
more conservative in guiding for the next year. We believe that the bank should
be able to maintain its NIM at current levels supported by stable CASA.
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cornerstone of PNB’s Q4FY13 results. Fresh NPL formations of ` 29.6bn was
flat QoQ and was lower than what the street was expecting. While NPL upgrades
declined QoQ, NPL recoveries showed an improvement. Overall, gross and net
NPLs declined QoQ both on absolute and percentage basis. Coverage ratio
also improved moderately from 56% in Q3 to 59%.
The bank restructured ` 64bn of loans during the quarter, while ` 64bn of loans
were reduced from the restructured loans portfolio as per the RBI guidelines.
Total restructured loans stood at ` 321bn forming 10.4% of the total loans
book. The management does not see a major restructuring pipeline going forward.
Balance sheet growth slowed down with loan growth of 5% and deposit growth
of 3%, in line with the management’s strategy of de-risking the balance sheet.
On average basis though, loan and deposit growth was better at 13% and 15%
respectively.
NIM at 3.51% improved moderately QoQ, however the management has become
more conservative in guiding for the next year. We believe that the bank should
be able to maintain its NIM at current levels supported by stable CASA.
We believe that fresh NPL formations should now start trending downward over the
next one year and NPL recoveries and upgrades should remain stable. Credit cost
should also start trending downwards, supporting the net profit growth over the next
two years. We find current valuation on 0.8x on our FY14 BVPS attractive and
maintain our Buy rating on the stock with target price of ` 1021 (based on PBR of
1x on FY14 BVPS).
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