PNB Q2 Results Preview: Improved asset quality and a projected 280% YoY increase in net profit to ₹1,563 crore

 PNB Q2 Results Preview: Improved asset quality and a projected 280% YoY increase in net profit to ₹1,563 crore

Today, October 26, is when the state-run lender Punjab National Bank (PNB) is scheduled to release its financial results for the second quarter of FY24. Today is the planned date of the PNB Board of Directors' meeting to announce Q2FY24 results.

Because of decreased provisions and stable loan growth, public sector bank PNB is anticipated to generate high profitability for the second quarter of FY24. Net interest margin may shrink as a result of rising funding costs, even while net profit and interest income are projected to grow.

With limited loan costs supporting the entire public sector banks, earnings growth is expected to be strong through September of FY24, albeit margins may contract. Opex is probably going to be high as long as banks cover salary adjustments. After a strong Q1FY24, Treasury performance could be slow throughout the quarter owing to an increase in bond rates. 

Loan growth at PSU banks should resume in a sequential manner, driven by sustained growth in the retail and MSME sectors and better corporate demand. Analysts predict that asset quality will continue to improve, and that credit costs will moderate further due to a robust PCR and a substantial drop in the SMA asset pool.

According to average analyst forecasts, Punjab National Bank (PNB) is likely to make a net profit of ₹1,563 crore for the July-September fiscal year, representing an increase of 280% from ₹411.3 crore in the equivalent quarter of the previous fiscal year.

The bank's net interest income (NII) may increase by 16% to $9,594 crore in Q2FY24 from $8,270.7 crore in the same quarter last year. In accordance with the performance of the whole sector, a rise in the cost of funds is anticipated to cause a sequential contraction in net interest margin (NIM). 

NIM is predicted to be 3.1%, up 10 basis points (bps) year over year but down 6 bps quarter over quarter.

Loan growth is probably going to be consistent, and asset quality could get better. The important metric to be monitored, according to analysts, is the rate at which net non-performing assets (NPA) are being reduced.

In addition to a decrease in impairments, Kotak Institutional Equities anticipates PNB to post a solid operational profit rise of 22%, which would lead to excellent profits growth. It is anticipated that loan growth patterns would be moderate (3% QoQ), with NIM declining, QoQ led by a more pronounced rise in funding costs. 

Given the stability and increase in bond rates during the quarter, we anticipate a sequential decline in AS-15 provisions pertaining to retirement. Slippages are anticipated to be 1.6%. As long as recoveries are anticipated to remain robust, overall NPL reduction will persist. According to Kotak Institutional Equities, "We anticipate gradually positive commentary on asset quality and net NPL reduction."

PNB's total loan growth has lagged behind the sector, according to Emkay Global Financial Services, while lower margins and treasury gains likely limit earnings. It anticipates a rise in slippages, notably agricultural NPAs.

In the past month, the price of PNB's shares has dropped by over 14%, despite the stock rising by over 7% during the previous three months. PNB shares have increased by more than 20% YTD and more than 57% over the course of the previous year.