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PNB 2022-23 Annual Report Analysis

Fri, 9 Jun

PNB has announced its results for the year ended March 2023. Let us have a look at the detailed performance review of the bank during the year 2022-23.

PNB Income Statement Analysis

• Interest income during the year rose 13.9% on a year-on-year (YoY) basis.
• Interest expenses were up by 10.7% YoY during the same period.
• Operating expenses increased by 18.8% YoY during the year.
• The bank's net interest income (NII) increased by 19.1% YoY during the fiscal. Consequently, net interest margins (NIM) witnessed a growth and stood at 2.8% in FY23 as against 2.6% in FY22.
• Other income increased by 1.2% YoY during the year.
• Net profit for the year declined by 13.3% YoY.
• Net profit margins during the year declined to 3.9% in FY23 from 5.1% in FY22.

PNB Income Statement – 2022-23

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*	% Change
Interest Income	Rs m	762,418	868,453	13.9%
Other Income	Rs m	120,977	122,396	1.2%
Interest Expense	Rs m	468,231	518,170	10.7%
Net Interest Income	Rs m	294,188	350,283	19.1%
Operating Expense	Rs m	204,908	243,357	18.8%
Pre-provision Operating Profit	Rs m	210,256	229,322	9.1%
Provisions & Contingencies	Rs m	173,497	198,629	14.5%
Profit before tax	Rs m	45,945	48,614	5.8%
Tax	Rs m	9,185	17,921	95.1%
Profit after tax	Rs m	38,607	33,485	-13.3%
Minority Interest	Rs m	-469	-103	78.0%
Net Interest Margin	%	2.6	2.8
Net profit margin	%	5.1	3.9

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PNB Balance Sheet Analysis

• The bank's deposits during FY23 stood at Rs 12,903.5 bn as compared to Rs 11,542.3 bn in FY22, thereby witnessing an increase of 11.8%.
• Advances for the year stood at Rs 8,374.6 bn as compared to Rs 7,337.7 bn during FY22, a rise of 14.1%.
• Cost of deposits for PNB fell 3.0% and stood at 3.6%, while yield on advances rose to 6.9%.
• The lender's investments rose to Rs 4,169.1 bn during the year from Rs 3,885.9 bn in FY22.
• Borrowing stood at Rs 701.5 bn, a growth of 18.2% as compared to previous year.
• Overall, the total assets and liabilities for FY23 stood at Rs 14,936.5 bn as against Rs 13,393.0 bn during FY22, thereby witnessing a rise of 11.5%.

PNB Balance Sheet – as on March 2023

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*	% Change
Networth	Rs m	975,819	1,028,805	5.4%
Advances	Rs m	7,337,658	8,374,590	14.1%
Deposits	Rs m	11,542,345	12,903,471	11.8%
Yield on advances	%	6.7	6.9
Cost of Deposits	%	3.8	3.6
Investments	Rs m	3,885,858	4,169,138	7.3%
Borrowings	Rs m	593,717	701,486	18.2%
Total Assets	Rs m	13,393,011	14,936,490	11.5%

Current Valuations for PNB

• The trailing twelve-month earnings per share (EPS) of the bank stands at Rs 3.0, an improvement from the EPS of Rs 3.5 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs 51.8, stands at 14.8 times its trailing twelve months earnings.
• The price to adjusted book value (P/ABV) ratio at current price levels stands at 0.6 times, while the price to income ratio stands at 0.6 times.

Per Share Data/Valuations

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*
Income per share (Unadj.)	Rs	69.2	78.9
Earnings per share (Unadj.)	Rs	3.5	3.0
Diluted earnings per share	Rs	3.5	3.0
Avg P/E ratio	Rs	11.3	14.8
Avg P/ABV ratio	Rs	0.4	0.6
Avg Market Cap	Rs	435,486	496,046
Dividends per share (Unadj.)	Rs	0.64	0.65

Ratio Analysis for PNB

• Efficiency Ratios

  Credit/Deposit Ratio: The bank's credit/deposit ratio improved and stood at 64.9x during FY23, from 63.6x during FY22. The credit/deposit ratio tells us how much money a bank has raised in the form of deposits and has deployed as loans.

  Debt to Equity Ratio: The bank's debt to equity ratio increased and stood at 13.22x during FY23, from 12.44x during FY22. The debt to equity ratio of a bank tells us how much debt a bank uses relative to its equity.

• Liquidity Ratios

  Capital Adequacy Ratio (CAR): PNB's capital adequacy ratio (CAR) was at 15.5% as on 31 March 2023 as compared to 14.5% a year ago. This ratio helps measure the financial strength of the bank or any finance company to meet their obligations using their assets and capital.

  A bank that has a good CAR has enough capital to absorb potential losses. Thus, it has less risk of becoming insolvent and losing depositor's money.

  Provision Coverage Ratio (PCR): Apart from CAR, you also need to take a look at the bank's PCR and LCR ratios. Provisioning coverage ratio (PCR) is the percentage of funds that a bank sets aside for covering losses due to bad debts.

  So a high PCR ratio means asset quality issues are under control and the bank is not vulnerable.

  Liquidity Coverage Ratio (LCR): The LCR is designed to ensure that banks hold a sufficient reserve of high-quality liquid assets to allow them to survive a period of significant liquidity stress lasting 30 calendar days.

• Profitability Ratios

  Return on Equity (ROE): The return on equity (ROE) ratio for the bank deteriorated and stood at 3.3% during FY23, from 4.0% during FY22. The ROE measures the ability of a firm to generate profits from its shareholders capital in the company.

  Return on Assets (ROA): The return on asset (ROA) ratio of the bank deteriorated and stood at 0.22% during FY23, from 0.29% during FY22. The ROA measures how efficiently the company uses its assets to generate earnings.

  Return on Capital Employed (ROCE): The ROCE for the bank improved and stood at 5.86% during FY23, from 5.34% during FY22. The ROCE measures the ability of a bank to generate profits from its total capital (shareholder capital plus debt capital) employed in the bank.

• NPA Ratios

  Gross NPA Ratio: The gross NPA ratio is the ratio of a bank's gross NPAs to gross advances. PNB's gross NPA ratio stood at 8.7% as of 31 March 2023 compared to 11.8% in the same period a year ago.

  A high gross NPA ratio is a bad thing as it indicates how much of a bank's loans are in danger of not being repaid.

  Net NPA Ratio: In simple language, net NPAs are simply the total non-performing assets minus the provision left aside. It gives you the exact value of NPAs after the bank has made provisions.

  The net NPA ratio of PNB was 2.7% in financial year 2023. This compared with 4.8% a year ago.

Key Ratio Analysis

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*
Credit/Deposit Ratio	x	63.6	64.9
Debt to Equity Ratio	x	12.4	13.2
Loans / Deposits	x	0.1	0.1
Capital Adequacy Ratio	%	14.5	15.5
Return on Equity	%	4.0	3.3
Return on Assets	%	0.3	0.2
Return on Capital Employed	%	5.3	5.9
% of Gross NPAs	%	11.8	8.7
% of Net NPAs	%	4.8	2.7
Yield on Advances	x	6.7	6.9
Yield on Investments	x	7.0	6.5

To see how PNB has performed over the last 5 years, please visit here.

PNB Share Price Performance

Over the last one year, PNB share price has moved up from Rs 31.1 to Rs 51.8, registering a gain of Rs 20.7 or around 66.6%.

Meanwhile, the S&P BSE BANKEX is trading at 50,059.6 (up 0.3%). Over the last one year it has moved up from 40,466.5 to 50,059.6, registering a gain of 9,593.1 points (up 23.7%).

Overall, the S&P BSE SENSEX is up 14.0% over the year.

(To know more, you can check out historical annual results for PNB here and quarterly results for PNB here)