Punjab National Bank bank Share PNB Punjab National Bank

Punjab National Bank (PNB) (updated - 03 Feb 2012)
Troubled times continued for the country’s second-largest lender - Punjab National Bank (PNB) - as its third quarter performance showed deterioration in asset quality and a decline in margins. While its loan book grew faster than the banking industry at large, a high exposure to power and infrastructure sectors will continue to keep asset risks high in the coming quarters.

The bank reported a 23% increase in deposits and a 19% increase in advances during the October-December 2012 period, which is higher than the industry average of 16%. Though this is encouraging, most of the growth came from lending to large corporates, the majority of which were from the infrastructure and power sectors where growth is currently under pressure. The percentage of its net non-performing assets increased to 1.11% from 0.8% in September 2011, and is likely to increase further considering the composition of its loan book. Its net interest margin, which is the difference between the yield on advances and the cost of funds, decreased to 3.88% from 3.95% last year as the cost of funds increased. The management expects to end the current fiscal with a 3.5% margin, which is lower than the last year’s margin of 3.62%. The bank’s net interest income, which is the interest it earns after making interest payments, rose 10%, the slowest in nine quarters.

Higher provisioning for bad loans and depreciation in the value of investments resulted in an earnings growth of just 6% for the quarter. Unlike their counterparts in the private sector, most public sector banks reported an increase in slippages and a drop in net interest margins, and Punjab National Bank was no exception. But compared to other state-run banks like Central Bank and IDBI Bank whose profits declined, PNB proved a stronger player.

Its stock currently trades at a price-to-earnings multiple of 6.45 times, which is in line with its historical average, but lower than the industry average. It trades at a price-to-book value of 1.4 times, which is higher than its historical average, but lower than the industry average. Given the short-to-medium term concerns, investors should be cautious.
Source - Economic Times

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