Decline in NPLs positive for PNB: Quant Broking

Punjab National Bank (PNB) announced its Q3 results today, which beats street estimates. In an interview with CNBC-TV18, Nitin Kumar of Quant Broking reviewed the earnings and shared outlook on the stock.

Below is a verbatim transcript: Q: Any view at all on what may be PNB's net interest margins (NIMs)? A: Going by the numbers, it looks like the NIMs have been stable this quarter because the net interest income (NII) on a sequential basis is around 2 percent and the balance sheet is growing at around 3 percent. So, NIMs look like to have been stable between 3.5 percent and 3.55 percent this quarter. Q: How have you read the asset quality for PNB this time because the figures are already bad but there is no significant worsening on a quarter-on-quarter (QoQ) basis? A: Of course that is a positive sign. Last quarter PNB disappointed a lot with a big increase in gross non-performing loans (NPLs). This quarter both the gross and net NPLs have declined marginally and subsequently given the provisioning expenses are much lower, the bank has delivered a beat on consensus earnings. Q: Would you be a little skeptical or would you be more optimistic with regards to the asset quality trends going forward considering they have a lot of broad based exposure to sensitive sectors? A: Yes, in that sense of course PNB has always been a little risky because even if you look at the kind of growth in the risk-weighted assets for PNB, that is running far higher than either the balance sheet growth or the loan growth. So that shows a rising risk tendency in PNB. They are growing more in sectors like metals, textiles and other risky infrastructure sectors, which has been leading to this kind of increase in gross NPLs earlier. So still need to look at as to how the slippages have panned out this quarter and how the recoveries and upgrades have been.