Punjab National Bank's Q1 recovered from Q4FY15 with stable asset quality ratio after 9 consecutive quarters of worsening. The bank's Q1 slippages stood at Rs 2806 crore. While experts hailed this slippage figure, they believe it is not enough for them to rerate the stock just yet.
Below is the transcript of IIFL's Rajiv Mehta & ICICI Direct's Kajal Gandhi's interview with Ekta Batra & Latha Venkatesh on CNBC-TV18.
Latha: Your views on slippages of Rs 2806 cr this quarter?
Mehta: This is a big positive then because so far I was thinking that probably the slippages in this quarter could be huge given the trend that what we had seen in the last two years on quarterly basis. So, we were actually working with a slippage number close to Rs 5,000 crore, so if the number what you have said is correct, that is significantly lower and it is very difficult to again foretell whether this number will be sustainable or not but at least for this quarter it is a big positive surprise for the stock.
Latha: If you can once again repeat your book value, I missed that.
Mehta: My current estimate is about 151 for the adjusted book value for FY17, so it is trading at sub-book value, you are correct about that but our view- it is very difficult to change a long-held view on PSU Banks unless you see a spate of strong performance or a sustained strong outperformance by these banks.
Ekta: Are you going to change your estimates just based on this quarter numbers or are you going to wait for a couple of more quarters to check sustainability?
Mehta: There is no beat in terms of profit after tax (PAT) so I am not so sure whether I will change my earnings estimate so much. It also a lot depends on the management commentary which will follow soon. So, it very difficult to tell what kind of revision will come in my earnings or my estimates but at least I can say safely about my view that possibly my view will not change just by one quarter or good performance.
Ekta: Your quick take on Punjab National Bank (PNB) numbers, will you be changing any estimates, your call on this stock and how you have read the numbers in totality?
Gandhi: Broadly if the slippages are Rs 2,800 crore we will not be changing too much. We were working on Rs 3,000-4,000 crore estimate for the gross non-performing asset (GNPA) addition so this is broadly in line to what we were thinking. We do have a buy already on this stock because there are selective PSU banks only where you can work with there and not too many options left because mid size PSU banks anyways aren’t doing that at all great. So we will continue with the positive view on couple of PSU Banks.
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