Experts disappointed with PNB Q2; blame high provisions
Market experts say that quarterly earnings posted by Punjab National Bank were way below estimates. They also cite high provisions as being the problem for the mismatch.
November 08, 2013 / 17:29 IST
Public sector lender Punjab National Bank (PNB) reported a 52.6 percent fall in its net profit for the July-September quarter. Experts gave their thumbs down to the bank’s performance.
Vaibhav Agrawal of Angel Broking says that the numbers came in 40 percent lower than their estimates. Provisions of Rs 1800 crore exceeded by almost Rs 700 crore from their built-up numbers, he tells CNBC-TV18. He maintains a ‘neutral’ position on the stock. Meanwhile, Hatim Broachwala of Karvy Stock Broking says that the lender’s net interest incomes (NII) looked better. The PAT is lower than expected, he adds. He still maintains a ‘buy’ call on the stock as a review on the fine print of the results will be done later. Also read: Consolidation complete; will return to growth strategy: PNBBelow is the edited transcript of his interview to CNBC-TV18.Q: Is it a complete disappointment for the Punjab National Bank (PNB) on bottom-line?Agrawal: Yes, definitely. It is almost 40 percent lower than our estimates. We were working with better asset quality numbers this quarter compared to last quarter for PNB but it looks like another quarter of pretty bad asset quality numbers. The provisions at Rs 1,800-1,900 crore are almost Rs 700 crore more than what we had built in. That is where the disappointment has come in.Q: PNB stock is already down 4.5 percent. What would you do with the stock given these kind of internals? Do you think there is possibility of more downside?Agrawal: This clearly reinforces our view that contrary to the stock price movements in the last few days, the overall asset quality numbers for the PSU banks put together have not really been improving and the PNB numbers corroborate that. We really did not upgrade any of our target prices and remain neutral. Even for PNB these numbers are an indication that it is little too soon to be expecting any major improvements in PSU banks as yet.Q: What is your first take on PNB?Broachwala: Overall Net Interest Income (NII) looks to be better than expectations. The PAT has been seen a little bit below our expectations, mainly because of very high provisioning. We will wait for further breakup of provisioning whether it is largely Non-Performing Loan (NPL) related or even the investment depreciation because this quarter there was a slide in the G-Sec yields. On the Non-Performing Asset (NPA) front GNPA has increased substantially, so overall results look slightly below expectations.Q: There were a lot of people who when they saw the earnings of Bank of India (BOI) thought that maybe the PSU banking space is turning around and they should start considering it as a good cyclical play which is improving. Would you recommend fresh money now entering into these PSU banking names and if yes, which ones? Would you be selective about it and put it in which ones?Broachwala: There have been a rally past few weeks in the PSU banks but given the valuations and expectations, we feel that some opportunity still lies in the PSU space. We like BOI and Union Bank and even PNB is a buy for us. We would try to review it after we get full details. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
