Punjab National Bank, the country’s third largest public sector lender, reported a 160% surge in net profit to Rs 3,010.27 crore for the fiscal fourth quarter ended March on the back of improved asset quality and higher loan disbursals.

In the year-ago period, the state-owned bank’s net profit stood at Rs 1,158.61 crore. Sequentially, net profit rose 35.4% from Rs 2,222.81 crore.

Total interest earned for Q4 stood at Rs 28,113.43 crore, up 18% from Rs 23,848.61 crore a year ago. Sequentially, total interest earned rose marginally by 3% from Rs 27,287.81 crore.

Dividend

The bank's board recommended a dividend of Rs 1.50 per share for FY24, subject to approvals. This is the highest payout by the bank in the past nine years.

The record date for the payment of Rs 1.50 dividend has been fixed as 22 June, while the payment will take place from 23 June to 29 June.

NII and NIM

Net interest income (NII) increased to Rs 10,363 crore in Q4 from Rs 10,293 crore in Q3 and Rs 9,499 crore in Q4FY23 showing an improvement of 9.1% year-on-year.

Net interest margin (NIM) stood at 3.25%, while total yield on advances improved 50 basis points to 8.44% in Q4 and by 112 bps to 8.28% in FY24. 

Asset Quality

The bank's asset quality improved, with gross non-performing assets (NPA) ratio falling to 5.73% as on 31 March 2024, from 8.74% a year ago and 6.24% a quarter ago. 

Net NPAs plunged to 0.73% from 2.72% in Q4FY23 and 0.96% in Q3. 

In absolute terms, gross NPAs declined by Rs 20,985 crore to Rs 56,343 crore from Rs 77,328 crore in March 2023 and net NPAs plunged by Rs 15,786 crore from March 2023 to Rs 6,799 crore as of March 2024, PNB managing director and CEO Atul Kumar Goel told reporters.

With the asset quality improving, the lender got the legroom space to bring down its provisions by 58.5% to Rs 1,588.05 crore during the quarter. (excluding provisions for tax and contingencies). Of these, provisions for NPAs were down 45.9% to Rs 1,957.9 crore.

The provision coverage ratio of the bank was at 95.39%, improving by 849 basis points year-on-year.

Deposits

The bank’s deposits grew 6.9% year-on-year to Rs 13.69 lakh crore. Of this, savings deposits increased 3.5% to Rs 4.80 lakh crore while current deposits grew to Rs 72,201 crore.

CASA (current account savings account) deposits increased to Rs 5.52 lakh crore recording, up 2.7% year-on-year. Retail term deposits (less than Rs 2 crore) grew 9.5% YoY to 5.63 lakh crore.

Advances

The bank’s loan book grew 11.2% year-on-year to Rs 9.83 lakh crore. 

Total retail credit rose 12.6% to Rs 2.23 lakh crore. The bank grew under core retail recording a year-on-year growth of 15.2%. Within this, housing loans grew 14.5% to Rs 93,694 crore while vehicle loans surged 25.6% to Rs 20,692 crore. Personal loans increased 14.4% to Rs 20,766 crore.

Agriculture advances grew 11.3% to Rs 1.58 lakh crore and MSME loans by 7% to Rs 1.39 lakh crore in March 2024.

Credit Cost

For the quarter ended March 2024, credit cost improved by 91 basis points from 1.72% in Q4FY23 to 0.81% in Q4 FY24.

Full Fiscal

For the full fiscal, the bank reported a 229% surge in net profit on a standalone basis to Rs 8,244.62 crore, compared to Rs 2,507.2 crore reported at the end of FY23.

Total interest earned in FY24 was Rs 1.07 trillion, a 25.6% year-on-year growth from Rs 85,144.11 crore in FY23.

During FY24, NII rose 16.2% to Rs 40,083 crore from Rs 34,492 crore in FY23.

Credit cost improved by 63 basis points from 2.03% in FY23 to 1.4% in FY24. 

Slippage ratio improved year-on-year by 159 bps to 0.72% in FY24 from 2.31% in FY23.

Guidance

Goel has projected a credit growth of 12% and deposit growth of 10% for FY25. 

The focus of the bank will be on the RAM (retail, agriculture and MSME) segment. The bank is planning to grow this to about 58% to 60% of its assets in the next three years from the current 55%, he added.

The bank is targeting to lift its CASA deposit ratio from 41% to 42%. “With a branch network of 10,000 all over the country, this is an achievable feat. The low-cost deposits are allowing us to keep the credit cost at 1.40%, one of the lowest in the industry,” Goel said. 

Goel is confident that the bank will be able to maintain its NIM at around 3%.

Explaining his positive outlook on further improving the bank’s asset quality, Goel said: “Our underwriting standards have been overhauled, which is already leading to negligible NPAs. Since July 2020, we have sanctioned Rs 7.87 trillion worth of loans. Of this, the sanction limit is Rs 5.83 trillion. For this amount, we have a gross NPA of just Rs 1,775, which is 0.25% of the portfolio,” he said.