Punjab and Sind Bank reported a 24.07% year-on-year rise in net profit to Rs 373.24 crore for the quarter ended December 2022 on the back of strong growth in advances, improved margins and reduction in bad loans. 

Advances

The state-run bank’s loan book grew 16.54% YoY to Rs 77,745 crore in the fiscal third quarter and incrementally by Rs 4,006 crore. 

While retail advances climbed 32.31% YoY to Rs 14,739 crore, RAM (Retail, Agriculture & MSME) advances surged 19.07% to Rs 39,956 crore in the quarter ended December 2022. The bank had Rs 8,579 crore of home loans and Rs 1,175 crore of vehicle loans during the quarter.

“Most of the incremental growth is from high quality assets on the corporate side from public sector undertakings. On the retail side, we are very much focused on housing, vehicle and gold loans. Our exposure to high quality NBFCs has also risen sharply,” Punjab and Sind Bank managing director and chief executive officer Swarup Kumar Saha told Indianbankingnews.com.

Margins

After the Reserve Bank of India (RBI) introduced a series of rate hikes, Punjab and Sind Bank repriced loans and the yield on advances grew by 42 basis points to 8.11% during the quarter, from 7.69% a year ago. This helped the bank improve its net interest margins (NIM) by 6 basis points sequentially and 28 basis points over the year-ago period to 3.12% at the end of December 2022.

The bank revised upwards its guidance for NIMs to 2.95-3% for FY23 from the earlier estimate of 2.90%.

“The increase in our yields is also because about 32% of our total advances is linked to the EBLR (external benchmark lending rate), which immediately moves up when RBI hikes repo rates. About 55% of our loans are linked to MCLR (marginal cost of funding-based lending rate) where the rates will go up at the time of reset. About 85% of our loans are linked to the floating rate. So, the bank will stand to gain in a rising interest rate scenario,” Saha explained.

Total income

The bank’s total income grew 9.94% YoY to Rs 2,245 crore in the December quarter. 

Interest income grew 12.16% YoY to Rs 2,107.44 crore. Net interest income (NII) improved to Rs 805 crore from Rs 758 crore in October-December quarter of the previous fiscal. 

However, the bank’s non-interest income de-grew 19.30% to Rs 138 crore during the quarter.

“This is because we had some chunky income last year. We are planning to ramp this up by some insurance tie-ups and putting more thrust on the bank’s own products. Since the base is small, the percentage looks,” Saha said.

Asset Quality 

The bank’s asset quality improved with gross non-performing assets (NPAs) declining sharply to 8.36% of the total advances at the end of the quarter, compared to 14.44% in the same quarter of the previous fiscal. The gross NPAs in the bank’s book is about Rs 7,128 crore. 

The bank had fresh NPA additions of Rs 243 core during the quarter. The bank has a special mention account (SMA) book of Rs 554 crore.  These are accounts where the principal or interest have not been repaid for 0 to 60 days. If the repayments fail to come for 90 days, it is classified as an NPA account.

“We had upgrades and recoveries of Rs 596 crore during the quarter. This will continue to be the pattern, with the fresh NPA additions being lower than our recoveries and upgrades. The bank is putting a lot of focus on recoveries,” said Saha.

Net NPAs eased to 2.02% as against 3.01% a year ago.

Deposits

The bank’s total business increased 12.08% YoY to Rs 1,87,242 crore in the third quarter ended December 2022.

Total deposit increased by 9.11% to Rs 1,09,497 crore.

As of December 2022, the bank had 18.42 lakh PMJDY accounts and CASA (current account savings account) deposits totalling Rs 539 crore.