BackSuperb performance from PNB
Superb performance from PNB
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Loan growth as at end-March was 29.5% y-o-y. That’s down from 39% y-o-y growth at the end of December, which is as per expectations, given the higher base. Net interest margin, at 3.56% was also lower than in the December quarter. The increase in loans led to net interest income increasing by 25.7%. But the rise in non-interest income was far more spectacular, going up 59.3%. Of this, the growth in fee income was 28.3% y-o-y, but the bulk of the non-interest income was trading income from sale of securities of Rs238.4 crore, a rise of 238%.
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Did PNB’s breakneck pace of growth lead in an environment of increased risk lead to more bad debts? It did not, with a little help from restructured assets, which amounted to Rs4,074 crore. Net NPAs were 0.17% of net advances at the end of March, compared with 0.39% at the end of December. As a matter of fact, both gross as well as net non-performing assets have come down substantially in absolute terms from the levels they were at in December. What’s more, the provision cover, too, has improved.
The bank management has guided for a sustainable growth of around 20% in advances over the next few years, stating that otherwise it would not be able to raise the necessary capital, given the constraint that the government’s majority stake should remain.
Profit growth is expected to be a bit higher than the rate of growth of advances, given that the huge trading profits may not be repeated. The bank expects to maintain its net interest margin at around 3.5% in FY10.
The bank’s March quarter results have beaten street expectations. The PNB stock has been broadly following the Bankex. The bank’s prospective price-to-book ratio is higher than most other public sector banks. But the better-than-expected results and the plan to divest 26% stake in its housing company, which will bring in Rs75-80 crore, should see the stock outperform in the short term.
Graphics by Ahmed Raza Khan / Mint
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