Punjab & Sind Bank managing director and CEO Swarup Kumar Saha said the state-owned lender will be foraying into the mutual fund distribution business while explaining that the fall in net profit in the fiscal first quarter was only a blip.

The bank is working on setting up a mutual fund distribution platform in partnership with a fintech company this financial year. This entry will increase the bank’s fee-based income, improve customer stickiness and enhance the brand value, Saha said.

Punjab & Sind Bank hopes to rope in the fintech partner by September. The platform is expected to go live in the fourth quarter of this fiscal.

“We are going to onboard a fintech partner through which we will offer to our customers various mutual fund schemes. This will add to our core fee income. We have already floated a request for proposal (RFP) to finalise the fintech partner," Saha said.

Speaking to reporters after announcing the fiscal first quarter results, Saha said the bank is expecting its loan book to grow by 13-14% in FY24 while deposits should increase by 8-10%.

Saha guided the bank’s gross non-performing assets (NPAs) to decline to 6% and net NPA to 1.5% in FY24. He said fresh slippages should fall below Rs 900 crore in the current financial year.

On net interest margin, Saha said the target is to keep it at 2.9% for the entire financial year.

The provision coverage ratio should increase to 90% from the current level of 88.58%, Saha said.

Net profit in Q1

Saha said the fall in profits in the June quarter was only a blip and the bank would sustain its bottom line performance of the last fiscal by catching up during the subsequent quarters of FY24. 

A recovery of Rs 1,500 crore from bad loans is targeted for the year and this would boost the bank’s profits, he added.

For the entire fiscal year 2022-23, Punjab & Sind Bank had recorded its highest-ever net profit of Rs1,313 crore, up 26.37% YoY.

The bank’s net profit fell 25.37% year-on-year to Rs 153 crore for the June 2023 quarter, partly due to fresh slippages and the wage revision provision. In the year-ago quarter, the bank had reported a net profit of Rs 205 crore. 

Saha said the YoY decline in net profit was due to a Rs 57 crore provision towards the wage revision under negotiation. Fresh slippages of Rs 450 crore in the quarter, including a mid-corporate of Rs 92 crore, also contributed to the drop in the quarter’s net profit.

The bank has made a provision of Rs 42 crore for that particular account, which is in the logistics business, Saha said.

Besides, recovery from the technically written-off account in the June 2023 quarter was about Rs 10 crore, much lower than Rs 60 crore in the year-ago quarter.

The bank’s total income in the June 2023 quarter increased to Rs 2,494 crore versus Rs 1,915 crore a year ago.

During the quarter, the bank earned an interest income of Rs 2,316 crore compared to Rs 1,800 crore in the year-ago period.

NIM and NII in Q1

The bank's net interest margin (NIM) in the June 2023 quarter increased to 2.63% from 2.53% a year ago. This was helped by a rise in yield on advances by 143 basis points to 8.45%, despite an increase in cost of deposits to 5.24% from 4.16%. 

The bank expects NIM to climb to 2.9% for the financial year. "The incremental movement on the cost of deposits is lower than the yield on advances. That explains how our NIM has gone up," said Saha.

Net interest income (NII) rose 4.09% YoY to Rs 738 crore from Rs 709 crore a year ago.

Loan growth in Q1

Punjab & Sind Bank has reported a 10.43% year-on-year growth on gross advances to Rs 80,314 crore in the quarter ended 30 June 2023. The lending to retail, agriculture and MSME (RAM) sectors constitute 53.60% of the total advances while corporate accounts for the remaining 46.40%.

Within the retail portfolio, home loan saw a 14.68% jump in the June quarter to Rs 8,351 crore from Rs 7,282 crore a year before. Vehicle loan stood at Rs 1,936 crore, up 17.76% YoY, and gold loan at Rs 853 crore, up 43.60%.

Deposit growth in Q1

Total deposits grew 12.49% to Rs 1,14,211 crore in the quarter ended June 2023 compared to Rs 1,01,534 crore a year ago.

CASA (current account savings account) deposits grew 4.84% YoY to Rs 36,194 crore. The CASA deposit ratio fell 2.32% YoY to 31.69% of the total deposit mix, from 34% in the earlier-year quarter.

Term deposits rose by 16.42% YoY to Rs 78,017 crore from Rs 67,011 crore.

Total business stood at Rs 1,94,525 crore, up 11.63% YoY from Rs 1,74,261 crore in the year-ago quarter.

The credit-to-deposit ratio fell by 1.31% to 70.32% from 71.63%.

Asset Quality

The bank’s asset quality improved during the quarter, with gross NPAs easing to 6.80% from 11.34% a year earlier.

Net NPAs declined to 1.95% in June 2023 from 2.56%.

The bank is working on bringing down gross NPA to 6% and net NPA to 1.5% during the year.

The provision coverage ratio stood at 88.58% against 88.10% in the same quarter of the last fiscal. The target is to take it up to 90% in FY24.

Recovery

During the June 2023 quarter, the bank recovered Rs 345 crore from NPAs.

The bank expects a recovery of Rs 1,500 crore in the current financial year, Saha said.

Capital adequacy

Capital adequacy ratio increased to 17.19% from 16.79% at the end of June 2022.