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Punjab Nat. Bank: Another weak quarter - Views on News from Equitymaster
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Punjab Nat. Bank: Another weak quarter
Nov 8, 2013

Punjab National Bank (PNB) declared its results for the second quarter (2QFY14) and first half for the financial year 2013-2014. While the net interest income increased by 10.1% YoY for the quarter, the net profits declined by 52.6% YoY. For first half (1HFY14), the profits declined by 23.0% YoY. Here is our analysis of the results.

Performance summary
  • Net interest income (NII) grows by 10.1% YoY in 2QFY14, on the back of modest 6.5% YoY growth in advances.
  • Other income declined marginally by 0.9% YoY in 2QFY14. But it grew by 8% YoY during 1HFY14.
  • The profitability for the quarter has declined by higher percentage of 52.6% YoY and down 23.0% YoY for the 1HFY14 on account of a dramatic rise in provisions.
  • Net NPA (non-performing assets) to advances comes in higher at 3.07% in 2QFY14 from 2.69% in 2QFY13. Also, on a sequential basis the NPAs have moved up for the quarter.
  • Capital adequacy ratio currently stands at 11.62% at the end of 2QFY14 as per Basel III norms.

Rs (m) 2QFY13 2QFY14 Change 1HFY13 1HFY14 Change
Interest income 104,280 107,335 2.9% 209,820 211,381 0.7%
Interest expense 67,804 67,180 -0.9% 136,413 132,150 -3.1%
Net Interest Income 36,476 40,155 10.1% 73,407 79,231 7.9%
Net interest margins (NIM) (%) 3.5% 3.5%        
Other Income 9,072 8,993 -0.9% 20,752 22,414 8.0%
Other Expense 20,219 23,800 17.7% 40,421 46,558 15.2%
Provisions and contingencies 10,738 18,987 76.8% 21,063 29,652 40.8%
Profit before tax 14,590 6,361 -56.4% 32,674 25,434 -22.2%
Tax 3,935 1,306 -66.8% 9,562 7,626 -20.2%
Effective tax rate 27.0% 20.5%   29.3% 30.0%  
Profit after tax/ (loss) 10,656 5,055 -52.6% 23,113 17,808 -23.0%
Net profit margin (%) 10.2% 4.7%   11.0% 8.4%  
No. of shares (m)   353.5        
Book value per share (Rs)*   976.2        
P/BV (x)   0.5        
* (Book value as on 30th September 2013)
What to expect?
At the current price of Rs 521, the stock is valued at 0.5 times our estimated FY16 adjusted book value. We will update our analysis by 11th November 2013 after incorporating the key takeaways from the conference call with the management.

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