Release Date: July 27, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Punjab National Bank (BOM:532461, Financial) achieved a total business of INR24.39 trillion, marking a 10% growth rate.
- The bank's net profit surged by 159% year-over-year, reaching INR3,252 crores.
- Gross NPAs reduced significantly from 7.73% to 4.98% year-over-year.
- Net interest income increased by 10.2%, reaching INR10,476 crores.
- The bank's Provision Coverage Ratio (PCR) improved to 95.90% from 89.83% a year ago.
Negative Points
- The cost-to-income ratio remains high at 53.28%, though it has improved from the previous quarter.
- Despite strong credit growth, the bank is maintaining a conservative guidance of 11-12% for the year.
- The bank's SMA 0, 1, and 2 loans total INR1,01,883 crores, indicating potential future risks.
- The bank incurred a one-off expense of INR558 crores for the purchase of PSLC, impacting operating expenses.
- The CET-I ratio does not include quarterly profits, which could affect the perceived capital adequacy.
Q & A Highlights
Q: Sir, I had a few questions that you yourself mentioned in a brief comment on your annualized credit growth. So is it likely or do you see scope for your credit growth being faster than what you've guided given that your annualized run rate is already high? And do you think there are enough deposits in the system to be able to support any up move in credit growth forecast, if at all, there is any?
A: As far as credit growth is concerned, we had given the guidance of 11% to 12%. We will stick to say 11% to 12%, although we have achieved 12.20%, it is in the same range. 12% we have given the guidance, so I'm not revising. It will remain within 11% to 12% as far as deposit is concerned. I may tell you one thing, the deposit although there is a challenge in the banking industry, I'm not (inaudible) because there is a gap between the credit growth and the deposit. But as far as Punjab National Bank is concerned, as of it, I'm not forcing any channel because we are having 10,000 branches 24 customers. As I told you, we have opened more than 1 core accounts last year, more than 27 lakh accounts we have opened, the money will come definitely even because -- if you see my CD ratio, it is 73%. So definitely we are not raising the deposit because bulk deposit is available, but that is costly. But I will use that deposit if I'm not in a position to deploy that deposit (inaudible) manner. So deliberately we're not taking the bulk deposit. So we are trying to improve the CASA. And as I told you to 73% is my CD ratio, so whatever additional deposit I will raise, I will not be required to maintain on that SLR because I'm sitting on the more than INR78,000 crores excess as SLR. So I will be in a position to do 100% incremental deposit for the credit growth. So this is my answer of your query.
Q: And sir, the new LCR guidelines, have you got a chance, I know you'll be busy with results, but have you got a chance to have any rough impact of the new LCR draft norms I know it's a draft, but based on the draft.
A: Mahrukh, it is a draft guidance. They have invited comment also. It will be applicable from April 1, '25 next year as on date, my LCR is 125%. We've made a rough calculation also, impact of the -- will be around 10%. So 115% will be the new -- as per the new guidelines.
Q: Sir, what was the recovery income this time versus last year first quarter, which is included in NII. And then what was the improvement in yield on investment because of the new investment guidelines, the new investment norms that kicked in, for which your reserves have also increased?
A: As far as this interest income in the -- concerning the recovery from the recovery that is in the range of the INR600 crores to INR700 crores. And I have seen that data also that is in the same range. This quarter is also between INR600 crores to INR700 crores. Even in the June '23 quarter, it was in the same rate. So that remains on the same. As far as your investment guidance is concerned, I would like to tell you, reserve already I have told you INR2,099 crores has been added net of tax in the general reserve and mark-to-market is INR257 crores. That is through P&L.
Q: Now going ahead, sir, the same question which Mahrukh has raised, like, when you say that you're already 4.5% and above in the credit (inaudible) 1 quarter itself. And if you analyze it is 18% plus growth is possible, still you're retaining the guidance of only 12%, whereas you said you are comfortable on extra SLR front also even if there is some challenge on the deposit. So what is stopping you to revise this guidance of the -- on the credit growth, like the way you are going now, can it not be considered like, say, 15%, 16% for FY '25?
A: Definitely, I told you 4.6% quarterly (inaudible) 18%, but I'm giving the guidance for the 11% to 12%. Why I'm giving 11% to 12% because we are the big bank. There is some short-term advance also available in the book because we have to see what is our incremental cost of the deposit, whether we will reprice that advances or not because we're not doing any business where we should not get any (inaudible) profit also. So we will not give any (inaudible) This is the reason, we will not rollover, if we will not get the pricing of our choice. This is the reason. We are stick to 11% to 12%, but definitely, we will try. If opportunity available, business is available, we will definitely do. Deposit is not (inaudible) deep taste but deposit as I told you, if I think about the , if I will get the deal on the asset side, more than 8%, I will not allow to -- the opportunity to go down. Suppose I'm getting the asset side on the 8% because (inaudible) they are asking for the 8%, sometimes less than 8%. What is the benefit to raise the (inaudible) deposit of the 8% giving the loans to just increase of the top line. So this is the answer of the credit growth.
Q: Congrats on a very good quarter. Yes, sir, I have two questions. One is on the OpEx, like if I look at the OpEx number this quarter, that still looks a tad higher, especially the other OpEx. So was there any one-off in this? And how should we see the run rate going ahead?
A: One-off, there were definitely a one-off because we have incurred INR558 crores for purchase of PFCL. That is the only -- on account of this, this number has increased. Otherwise, this number will be normalized in this time in the subsequent quarter also.
Q: And sir, secondly, on -- while you have like realigned the credit cost guidance and -- but that will directly feed into RoA or you will want to keep the RoA guidance unchanged at 1% by '25.
A: Nitin, you are very smart. I have given the guidance of 0.8% at the beginning and I have kept the credit cost only 1%. And if you see the first quarter result also, it is around 0.82%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
