 "PNB net at 24-quarter low")
Net profit for the Delhi-based bank in the July-September quarter of 2012-13 was Rs 1,065 crore. “I need to cover whatever we have lost in these two quarters. Otherwise, we should match with last year (2012-13),” said Chairman K R Kamath. He added as the consolidation phase was complete, the next two quarters would be better, compared to the second one.
The profit was not only 48 per cent lower than the Bloomberg consensus expectation of Rs 981 crore but the lowest for PNB since the September 2007 quarter. Meaning, the lowest in 24 quarters. The bank had reported net profit of Rs 425 crore in the June 2007 quarter.
More From This Section
The pressure on asset quality is visible, which slipped further, both compared to the year-ago quarter and sequentially.
Net interest income (NII) came in line with Street expectations at Rs 4,016 crore, up 10.1 per cent year-on-year. Other income was marginally lower on a yearly basis, at Rs 899 crore, which restricted growth in total income to eight per cent. The NII growth was driven by loan growth of 6.5 per cent, lower than analysts' expectations of seven to eight per cent. Loan growth has been in single digits since the March quarter, as the management focused on consolidation. Net interest margins were largely stable at 3.47 per cent versus 3.5 per cent in the September 2012 quarter. Oper-ationally, too, the performance was weaker. Expenses grew 17.7 per cent year-on-year (and 4.5 per cent sequentially) to Rs 2,380 crore for the quarter. Both employee costs and other exp-enses were up, 16.3 per cent and 21.1 per cent, respectively. Thus, operating profit at Rs 2,535 crore was flat on a year-on-year basis but down 14.8 per cent sequentially.
"The PNB results were much lower than expectations, as restructuring and incremental slippages continue to remain high. The asset quality issues are dragging for too long, with negligible loan growth. Given the weak numbers, we believe FY14 net profit estimates could be downgraded," says Siddharth Teli, head of equity research, Religare Capital Markets.
By consensus Bloomberg estimates, the FY14 net profit is pegged at Rs 4,614 crore. This seems unlikely, given that net profit was Rs 1,780 crore in the first half of this financial year.
PNB's asset quality also slipped. In fact, it is among the worst in the public sector bank space (based on the results declared so far). This is largely due to the bank's high exposure to troubled sectors and slowing growth. Which is why analysts remain sceptical on the PNB stock, despite cheap valuations of 0.5 times the FY14 estimated book value. For the September quarter, PNB's gross non-performing assets (NPAs) and net NPA ratios increased sequentially, as well as over the September 2012 quarter.
The bank's gross and net NPA ratios were 5.14 per cent and 3.07 per cent, up 48 basis points and 38 bps, respectively.
The asset quality has been under pressure for some quarters and the gross NPA ratio has moved up from 1.8 per cent in the March 2011 quarter to the present 5.14 per cent. Not surprisingly, the provisioning shot up 76.8 per cent year-on-year (up 78 per cent sequentially) to Rs 1,899 crore, pulling down the net profit. Kamath said the government had decided to infuse capital of Rs 500 crore in the bank in this financial year, raising its capital adequacy ratio from the current 11.62 per cent to 11.77 per cent.
The bank booked losses of Rs 48 crore on transfer of Available for Sale (AFS) securities to the Held to Maturity category.