Punjab National Bank has crossed Rs 25 trillion in business for the first time and reported a 145% jump in net profit to Rs 4,303.5 crore for the three-month period ended September, its highest in 16 quarters. In the year-ago period, net profit stood at Rs 1,756.1 crore.

“For the first time, the bank has crossed Rs 25 trillion in business. The growth in business, rise in net interest income and sharp improvement in asset quality by containing slippages with strong underwriting standards have contributed to the bank’s high profitability during the quarter,” Punjab National Bank managing director and CEO Atul Kumar Goel said.

The state-owned lender’s 2.5 times surge in bottom line was also led by a sharp fall in new provisions and contingencies to Rs 288.01 crore in the September quarter, from Rs 3,444.18 crore a year ago.

The bank raised a QIP of Rs 5,000 crore during the quarter, which helped shore up its capital adequacy rate (CAR) to 16.36% in Q2 compared to 15.09% a year ago.  

“We raised this money towards the end of the quarter and it helped in improving our capital reserves. We had an approval of Rs 7,000 crore but raised only Rs 5,000 crore. We may raise Rs 1,000 crore of Tier 1 bonds during the third quarter,” said Goel.

NII and NIM

PNB’s net interest income (NII), or the difference between interest earned and interest paid, rose 6% to Rs 10,517 crore on the back of improving credit cost and yield on advances. Credit cost improved by 123 basis points to 0.08% in Q2 of FY25 from 1.31% in Q2 of FY24.  The bank expects further improvement in credit cost as it enhances its ability to contain costs, Goel said. 

PNB’s global yield on advances was at 8.31% in Q2FY25 versus 8.15% in Q2FY24 and 8.10% in HY1FY2024. Global cost of deposits increased by 32 basis points year-on-year to 5.18% in Q2FY25 and 35 basis points to 5.14% for HY1FY2025.

Pre-provision operating profit in the September 2024 quarter grew 10.24% year-on-year to Rs 6,853.31 crore.

The global net interest margin stood at 2.99% in HY1FY’25 and 2.92% in Q2 FY’25.

Asset quality improves

The bank’s asset quality improved, with gross non-performing assets (NPAs) falling to Rs 47,582.25 crore as of 30 September 2024, from Rs 51,262.78 crore in the preceding quarter and Rs 65,563 crore a year ago. Gross NPA as a percentage of gross advances declined to 4.48% from 4.98% a quarter ago and 6.96% a year ago.

Net NPA declined to Rs 4,674.24 crore in Q2 of FY25 from Rs 5,930.06 crore a quarter ago and Rs 13,114 crore a year ago. Net NPA ratio fell to 0.46% from 0.60% sequentially and 1.47% in Q2 of FY24.

Loan book

The bank’s gross advances grew 12.76% to Rs 10,61,904 crore as on September 2024, from Rs 9,41,721 crore a year ago.

The RAM (retail, agri and MSME) advances, the focus area of the bank, grew 12.03% to Rs 5,64,049 crore from Rs 5,03,489 crore as on September 2023.

The bank’s core retail advances grew 19% over the previous year. While housing loans jumped 19.5% to Rs 1,09,948 crore, vehicle loans grew 25% to Rs 22,543 crore, agriculture advances rose 11.1%  to Rs 1,62,829 crore and MSME loans by 8.95% to Rs 1,51,071 crore.

“All segments of retail grew, with housing loans performing the best as robust demand came from tier 2 and tier 3 cities. We have not slowed down on any retail loan segment. The SME loan book growth looks a bit subdued. This is due to some SMEs growing in size and migrating to the corporate loan book,” Goel explained. 

Deposits

The bank’s global deposits rose 11.33% to Rs 14,58,342 crore as on September 2024, from Rs 13,09,910 crore a year ago.

CASA (current account savings account) deposits grew 3.4% year-on-year to Rs 5,56,739 crore. Of this, savings deposits rose 3.7% to Rs 4,88,635 crore, while current deposits grew 1.6% to Rs 68,104 crore.

The CASA share in the total deposit mix stands at 39.31% as on September 2024.

The bank’s global business grew 11.93% to Rs 25,20,246 crore as on September 2024, from Rs 22,51,631 crore as on September 2023. 

CD ratio

The credit-to-deposit (CD) ratio of the bank improved to 72.82% from 71.89% a year ago. 

The business per employee improved to Rs 25.26 crore as on September’24 from Rs 22.65 crore a year ago.

Business per branch improved to Rs 240.72 crore from Rs 217.65 crore as on September 2023.

Goel expects RBI to cut rates by March 2025

Goel said he expects the Reserve Bank of India (RBI) to cut interest rate by 20 to 25 basis points within the next six months, provided inflationary conditions remain favourable.

The RBI, in its latest monetary policy, kept the repo rate unchanged at 6.5% for the tenth consecutive time. This is in contrast to the US Federal Reserve, which recently lowered interest rates by 50 basis points to mark its first policy easing in four years.

India’s inflation stands at 4.6% in the first half of 2024-25, down from 5.5% during the same period last year.

Goel said deposit rates are at their peak. “I don’t foresee an increase in deposit rates now,” he stated.