Punjab National Bank’s fiscal first-quarter net profit slumped 48% to Rs 1,675 crore, but managing director and CEO Ashok Chandra said the setback is restricted only to the passing quarter on account of one-time deferred tax.

The state-owned lender took a hit of Rs 3,324 crore in the June quarter due to remeasured deferred tax assets as it moved to the new tax regime. 

“Going forward, the migration to the new income-tax regime will help the bank. This was the right time to move and it is only a one-time impact. Profitability for the full-fiscal ended March 2026 should be at the same level as in FY25,” Chandra said.

PNB had reported a net profit of Rs 4,567 crore in the preceding March 2025 quarter while in the year-ago period it was at Rs 3,251.5 crore. The bank expects to make up in the remaining three quarters of the current financial year. For FY25, the lender’s net profit was Rs 16,630 crore.

Chandra said the other key parameters, including profit before tax and asset quality, have delivered in the April-June quarter and the bank is on track to achieve its targets for the fiscal.

The bank’s operating profit for the June quarter rose 28% to Rs 7,081 crore versus Rs 6,581 crore a year ago. Total income rose 15.7% year-on-year to Rs 37,232 crore.

Asset quality

The bank's asset quality improved, with gross non-performing assets (NPAs) declining to 3.78% of gross advances as of 30 June 2025, from 4.98% a year ago and 3.95% a quarter ago.

Net NPA also declined to 0.38% from 0.60% a year ago and 0.40% in the prior quarter.

Fresh NPA additions in the June quarter fell to Rs 1,886 crore, from Rs 3,001 crore in the prior quarter.

The slippage ratio fell to 0.71% as of June-end, from 1.14% a quarter ago. 

Provisions fell to Rs 396 crore from Rs 792 crore reported in the same quarter of last fiscal year.

NII and NIM

However, net interest income (NII), or the difference between interest paid and earned, rose just 1% YoY to Rs 10,578 crore in the June quarter from Rs 10,468 crore a year ago.

Domestic net interest margin (NIM) moderated to 2.84% from 2.96% a quarter ago. 

Chandra said during a post-earnings call that the real impact on NIMs will be seen Q3 and Q4 onwards, after the one-year deposits, 18-month deposits and special deposits get repriced.

Loan book

Global advances were up 9.8% YoY to Rs 11.29 lakh crore as on 30 June. While the retail loan book grew 11.8% to Rs 2.62 lakh crore, MSME loans were up 18.6% to Rs 1.69 lakh crore and agriculture 6.2% to Rs 1.78 lakh crore. The bank's corporate loan book grew 6.9% YoY to Rs 4.68 lakh crore.

Deposits

PNB’s global deposits grew 12.9% YoY to Rs 15.89 lakh crore.  The low-cost CASA (current account savings account) share in the total deposit mix fell to 36.99% as on 30 June 2025, from 37.95% in the prior quarter.

Guidance for FY26

Chandra said the bank expects credit growth to be at 11-12% for FY26, helped by project financing and growth in sectors such as real estate, infrastructure, smart metering, renewable energy and data centres.

The aim is to increase the RAM (retail, agri and MSME) portfolio from around 56.5% to at least 59-60% in the total loan book. 

The corporate lending book is expected to clock double-digit growth. “We are confident of achieving our credit growth target, though in the first quarter it has fallen marginally below double digit. We have a corporate loan pipeline of Rs 1.29 lakh crore and expect disbursements to pick up,” Chandra said in an earnings call.  

The bank intends to grow the co-lending book from the current size of Rs 850 crore but no specific target has been set for this fiscal.

Chandra said the bank expects deposit growth in FY26 to be in the region of 9-10% for the fiscal. The main focus would be to improve the CASA share to over 38% by the end of the fiscal, up from 36.99% as on 30 June 2025.

Chandra expects NIM to be between 2.8% to 2.9% in FY26.

For the full-fiscal, PNB expects gross NPA to be below 3% and net NPA at 0.35%. 

The bank is targeting recoveries of Rs 16,000 crore in FY26 and is well on track to achieve that, Chandra said. 

In the first quarter ended June, PNB recovered Rs 2,300 crore of bad loans. 

The slippage ratio is under control and is expected to be below 1% in FY26, he said.