PNB - Punjab National Bank Share Price

Punjab National Bank (PNB) management provided an optimistic outlook for FY'26, expecting credit growth in the range of 11% to 12% and deposit growth around 10%. They indicated that the global gross business has reached Rs. 26.83 trillion with a growth rate of 14%, consisting of gross deposits at Rs. 15.66 trillion (14.4% growth) and global advances at Rs. 11.17 trillion (13.6% growth).

Key financial figures for FY'25 include:

• Net Interest Income (NII): Rs. 42,782 crores, increasing by 6.7% YoY.
• Operating Profit: Rs. 26,831 crores, up by 7.6% YoY.
• Net Profit: Rs. 16,630 crores, a YoY growth of 101.7%.
• Return on Assets: 1.02% for Q4 FY'25 and 0.97% for FY'25.
• Gross NPA reduced to 3.95% from 5.73%, and Net NPA improved to 0.40% from 0.73% YoY.

Management expressed confidence about achieving a Net NPA rate below 0.5%, and noted a provision coverage ratio of over 96%. The bank projected total recoveries of around Rs. 16,000 crores for FY'26.

Further highlights include:

• A major focus on enhancing digital capabilities, with 94% of transactions conducted digitally.
• Improved capital adequacy ratio at 17.01%.
• Plans to strengthen market presence and improve customer-centric services.

Management aims to maintain cost optimization and improve non-interest income while reinforcing a robust framework for data analytics and cybersecurity. They remain committed to transparency in HR practices and maximizing recovery efforts.

Question 1: "If you see your slippage -- it's higher than what we have seen since Q1 FY'24. Will this be the normalized rate of slippage or were there any runoff?"

Answer: Yes, the overall slippages ratio is 0.73%, with our guidance for '24-'25 set below 1%. While we did witness some slippages in Q4, primarily in agri and MSME segments, these were below the Rs.10 lakh threshold. In April, we made a recovery of Rs.288 crore from these fresh slippages. I believe we will maintain our slippage ratio guidance, expecting quarterly slippages to range between Rs.1,500 crores to Rs.1,700 crores moving forward.

Question 2: "What impact did a large loan transfer to NARCL have on our books?"

Answer: In FY '24-'25, we recovered Rs.458 crore through NARCL in Q4, totaling Rs.863 crore for the year. This recovery resulted in a reversal of provisions. The significant improvement in technical write-offs this quarter was due to this recovery. Our recovery in Q4 was Rs.1,800 crore, showing notable progress from Rs.793 crore in Q3.

Question 3: "Will the increase in deposit costs impacting margins be due to the special deposit scheme?"

Answer: Yes, the recent increase in deposit costs can be attributed partly to a special deposit scheme. However, we anticipate that deposit costs have peaked. With that scheme now withdrawn and a planned revision of our deposit rates, we're looking to reduce costs moving forward. Thus, I expect NIMs to stabilize from Q3 onwards, without falling further in Q1.

Question 4: "What do you foresee regarding credit and deposit growth for FY '26?"

Answer: For FY '26, we are projecting credit growth of 11%-12% and deposit growth around 10%. We currently have Rs.1,15,000 crore in sanctions and anticipate disbursements of about Rs.85,000 crore. This aside, we expect growth of at least 15%-16% in our retail, agri, and MSME segments.

Question 5: "Can you elaborate on recovery expectations for FY '26?"

Answer: Our total recovery expectation for FY '25-'26 is Rs.16,000 crore, including Rs.1,500 crore from technical write-offs every quarter. Our focus on monitoring accounts closely helps drive this recovery, alongside our strong provision coverage ratio of over 96%. This systematic recovery approach positions us well for achieving our guidance.

Question 6: "Given recent performance, can we expect a more liberal dividend policy?"

Answer: Our recent dividend payout has doubled to Rs.2.90 per share, reflecting our strong performance. While we aim to maintain a conservative approach, I am optimistic about continued healthy dividends in the future as our performance improves, benefiting all stakeholders.

Question 7: "What is your outlook for margins and NIMs for the next financial year?"

Answer: While we expect some pressure on margins in the first half of FY '26, we aim to stabilize NIMs between 2.8% and 2.9%. We are actively revising our deposit rates and leveraging our strong treasury operations to offset any yield decline, anticipating a positive turnaround in the second half of the year.

Question 8: "What is the SMA-1 and SMA-2 number currently?"

Answer: The SMA-1 amount is Rs.22,828 crore, with SMA-2 at Rs.3,279 crore. Our overall NPA management strategy remains robust, with our total SMA percentage at 6.7%, ensuring we are closely monitoring our exposures to mitigate future risks effectively.