Led by higher provision for bad loans Punjab National Bank on Tuesday reported 93 per cent fall in its net profit figures for the quarter ended December 2015. The bank posted net profit of Rs 51.01 crore against Rs 774.56 crore in the corresponding quarter a year ago.
Reacting to the earnings, share price of Punjab National Bank tanked nearly 7 per cent to Rs 87.85 on Tuesday. Shares of the country’s second-largest public sector bank by assets continued to remain under pressure on Wednesday as the scrip closed 8.99 per cent down at Rs 79.95. Market experts are not looking very bullish on the further movement of Punjab National Bank shares.
Brokerage house Religare in a research note said, “Tax write-backs of Rs 910 crore helped the bank to post a net profit of Rs 51 crore. Management stated that 55 per cent of RBI’s review impact has been recognised and the balance will be accounted for in Q4. GNPA/NNPA ratios rose 200 basis points each to 8.5 per cent and 5.9 per cent. We maintained ‘Sell’ view on PNB shares with revised March 2017 target price of Rs 75 (from Rs 110 earlier).”
According to Angel Broking, Punjab National Bank has come out with a very disappointing set of results for the quarter. Though results were expected to be bad however, the quantum of rise in Gross NPAs has surprised us. The brokerage house said, “We don’t expect asset quality to stabilise any time soon for the bank. We maintain our ‘Neutral’ view on the stock.
Total provisions and contingencies made during the third quarter of 2015-16 grew by over two-and-a-half fold to Rs 3,775.53 crore as against Rs 1,467.77 crore in the same period a year ago.
Gross non-performing assets (NPAs) as a percentage to total advances rose to 8.47 per cent from 5.97 per cent in the same quarter an year ago. Net NPAs went up to 5.86 per cent from 3.82 per cent at the end of December 2014, the bank said.
The bank’s slippages in Q3FY2016 were to the tune of Rs 13,482 crore (vs Rs2,613 crore in Q2FY2016) of which Rs 5,500 crore slipped on account of the Reserve Bank of India (RBI)’s asset quality review (AQR). About Rs 2,232-crore slippages came in from the restructured portfolio. In Q3FY2016, the bank sold Rs 1,372 crore of non-performing assets (NPAs) to asset reconstruction company (ARC) and had refinanced Rs 6,800 crore of loans under 5:25 scheme.
According to the bank, the slippages in Q4FY2016 will also be higher (effect of AQR spread over Q3 and Q4) especially from iron & steel and infrastructure sectors.
The bank reported a loss of Rs 857 crore at PBT level which was largely off-set by tax reversals of Rs 908 crore. The operating performance was also weak as net interest income (NII) declined by 2.7 per cent year-on-year while net interest margin (NIM) dipped by 22 basis points quarter-on-quarter to 2.75 per cent.
Sharekhan in a research note said, “PNB advances grew by 8.4 per cent YoY, which is below the industry rate.” The brokerage house said, ” The ongoing NPAs issues and subdued return ratios would constrain any valuation expansion. We have maintained our ‘Hold’ rating on the stock.”