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Punjab Nat. Bank: Asset quality review pulls down earnings - Views on News from Equitymaster
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  • Feb 12, 2016 - Punjab Nat. Bank: Asset quality review pulls down earnings

Punjab Nat. Bank: Asset quality review pulls down earnings
Feb 12, 2016

Punjab National Bank (PNB) declared its results for the third quarter (3QFY16) and nine months for the financial year (3HFY16). While the net interest income fell by 2.7% YoY for the quarter, the net profits slumped by 93.4% YoY. The profits for nine months were down by 49.4% YoY. Here is our analysis of the results.

Performance summary

  • Interest income increased by 5.2% YoY in 3QFY16 and 5.6% in 9mFY16 on the back of 8.4% growth in advances.
  • Net interest margin (NIM) contracted by 0.4-0.5% in 3HFY15 and 9mFY16.
  • Other income increased by 29.4% YoY in 3QFY16 on the back of a three-folds jump in the recovery in written off accounts. For 9mFY16, other income was up 8.3% YoY.
  • Net NPA (non-performing assets) to advances have surged to 8.47% in 3QFY16 from 5.97% in 3QFY15 on account of the bank's clean-up exercise as part of RBI's Asset Quality Review over the last two quarters of the current financial year.
  • Capital adequacy ratio currently stands at 11.3% at the end of 3QFY16 as per Basel III norms.

Financial Performance snapshot

Rs (m) 3QFY15 3QFY16 Change 9mFY15 9mFY16 Change
Interest income 116,141 122,206 5.2% 346,648 366,003 5.6%
Interest expense 73,810 81,010 9.8% 219,009 240,563 9.8%
Net Interest Income 42,331 41,196 -2.7% 127,640 125,441 -1.7%
Net interest margin (%) 3.21% 2.75%   3.27% 2.87%  
Other Income 12,908 16,706 29.4% 40,856 44,249 8.3%
Other Expense 27,732 28,724 3.6% 80,975 79804 -1.4%
Provisions and contingencies 14,678 37,755 157.2% 41,633 74690 79.4%
Profit before tax 12,830 -8,577 -166.8% 45,888 15,195 -66.9%
Tax 5,084 -9,087 -278.7% 18,337 1,268 -93.1%
Effective tax rate 39.6% 105.9%   40.0% 8.3%  
Profit after tax/ (loss) 7,746 510 -93.4% 27,550 13,928 -49.4%
Net profit margin (%) 6.7% 0.4%   7.9% 3.8%
No. of shares (m)       1963.6
Book value per share (Rs)*       207.9
P/BV (x)       0.4

* (Book value as on 31st December 2015)

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