Net profit expected to more than triple, analysts expect fall in bad loans

Punjab National Bank is expected to report an over 240 percent year-on-year jump in its July-September net profit, led by healthy operating performance and a fall in provisions. The public sector bank’s (PSB) net profit is set to grow to Rs 1,399 crore in Q2FY24 from Rs 411 crore in the year-ago period, according to the average of three analysts’ estimates. On a sequential basis, it is expected to increase by 11.44 percent.

Punjab National Bank is scheduled to announce its results on October 26.

“We expect the bank to report healthy operating profit growth of ~22% and this along with a decline in provisions will result in healthy earnings growth,” Kotak Securities said in a note.

According to analysts’ estimates, the net interest income (NII) of the PSB is expected to come in at Rs 9,607 crore, a 16.16 percent increase year-on-year and a marginal 1 percent rise from the previous quarter.

The bank’s loans are set to grow 18 percent on an annualised basis to Rs 9.11 lakh crore, while deposits are expected to grow to Rs 13.19 lakh crore, a 10.52 percent increase from the previous year. Sequentially, loans and deposits are set to grow at 5.51 percent and 1.63 percent, respectively.

“Loan growth trends are expected to be modest, with NIM (net interest margin) down, QoQ (quarter-on-quarter) driven by a sharper increase in cost of funds. We expect AS-15 provisions (retirement-related) to be lower sequentially because bond yields have been stable/up during the quarter,” said the Kotak Securities note.

Motilal Oswal said the key monitorable for the bank would be the reduction in net non-performing assets (NPAs) and RoA (return on assets). Punjab National Bank’s net NPA ratio is expected to fall to 1.7 percent in the quarter from 3.8 percent a year earlier.

Kotak Securities also expects a reduction in bad loans. “We expect slippages to be at 1.6%. Overall NPL reduction will continue as recoveries are expected to be healthy. We expect incrementally positive commentary on asset quality and net NPL reduction,” the analysts said in their note.

The Punjab National Bank stock has given returns of 34.56 percent since June 30, outperforming the Nifty Bank index, which has fallen by 4.14 percent over the same period.

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