Like most other public sector banks, the credit crunch during the last quarter had little impact on Punjab National Bank (PNB). Advances grew at a year-on-year (y-o-y) rate of 39.52%, far above the loan growth for the sector.
Deposits also increased but the bank’s incremental credit-deposit ratio during the quarter was?a high 104%. So far, that breakneck pace of credit growth hasn’t led to a big rise in bad loans. As at the end of December, the bank’s gross non-performing assets (NPAs) were Rs3,264 crore, only slightly higher than the Rs3,125 crore of gross NPAs it had on 30 September. And with advances rising so fast, the gross NPA to advances ratio came down from 2.37% at the beginning of the quarter to 2.28% at its end.
Net interest margin also improved during the quarter to 3.85%, from 3.78% in the September quarter. The higher margin, together with high loan growth, led to a rise of 38% in net interest income y-o-y, compared with a 33% rise in the September quarter. Big gains (96% y-o-y) were also made in other income, with treasury profits doubtless adding to these gains. With only a small rise in provisions, net profit growth was an exceptionally high 85.8%, compared with a rise of 82.2% in operating profit. PNB’s stock has outperformed the Bombay Stock Exchange’s Bankex index in the last quarter and the excellent results indicate the outperformance is justified.
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