Punjab National Bank (PNB), a government-owned bank, is set to announce its financial results for Q2 FY24 on October 26. The bank is expected to report strong earnings for the quarter due to steady loan growth and lower provisions. While net profit and interest income are likely to increase, the net interest margin may experience a contraction as a result of the rising cost of funds. Overall, public sector banks are expected to see robust earnings growth in Q2 FY24 driven by controlled credit costs, although margins may moderate. Banks are providing for wage revisions which will keep Operation expenditure elevated.
PNB Q2 Results 2023 Preview
The treasury performance may be sluggish due to increased bond yields following a strong Q1FY24. According to analysts, PSU banks are expected to show an improvement in loan growth on a sequential basis, driven by an increase in corporate demand and ongoing growth in the retail and MSME segments. As a result of a healthy provision coverage ratio (PCR) and a sharp decline in the Special Mention Account (SMA) pool, credit costs are expected to decrease further.
Asset quality improvement is also likely to continue. Punjab National Bank (PNB) is estimated to report a net profit of ₹1,563 crore in the July-September period of FY24, indicating growth of 280% from ₹411.3 crore in the same quarter of the previous financial year, as per the average analyst estimates. The bank’s net interest income (NII) in Q2FY24 is projected to increase by 16% to ₹9,594 crore from ₹8,270.7 crore in the corresponding quarter of the previous year. The net interest margin (NIM) is expected to contract sequentially due to an increase in the cost of funds, in line with the overall sector performance. NIM is anticipated to be at 3.1%, with a growth of 10 basis points (bps) YoY, while a decline of 6 bps QoQ.
The loan growth is expected to remain steady, while asset quality may improve. The pace of reduction in net non-performing assets (NPA) remains the key monitorable, as analysts suggest. Kotak Institutional Equities expects healthy operating profit growth of 22% for PNB, and this, coupled with a reduction in provisions, could lead to a healthy growth in earnings. Loan growth trends are expected to be modest (3% QoQ), and the NIM is expected to decline, QoQ, due to an increase in the cost of funds. Kotak Institutional Equities stated that they anticipate a lower sequential AS-15 provision, which is related to retirement, due to stable or increasing bond yields throughout the quarter. The company also expects slippages to be at 1.6%, while maintaining that there would be a decline in non-performing loans (NPLs) due to expected healthy recoveries. They also predicted positive commentary on asset quality and a net reduction in NPLs.