PNB Q4 preview: Analysts see subdued profit; merger commentary eyed

Punjab National Bank (PNB), which is scheduled to announce its March quarter (January-March period) results for the financial year 2018-19 (FY19) today, is expected to report strong year-on-year (y-o-y) growth in terms of the net interest income (NII); however, net profit is likely to be subdued. Provisioning on IL&FS is expected to keep earnings under pressure, say analysts. 
 

The state-owned lender is projected to report up to 48 per cent y-o-y jump in NII against Rs 3,063.4 crore logged in the corresponding quarter of the previous fiscal. Analysts at Antique Broking, for instance, expect the numbers to come in around Rs 4,538.4 crore (up 48.2 per cent y-o-y), while those at Phillip Capital pegs it around Rs 4,411.3 crore.
 

On a sequential basis, NII is expected to grow 6 per cent against Rs 4,290.1 crore earned in Q3FY19.
 

Furthermore, Phillip Capital expects net interest margin (NIM) to rise to 2.8 per cent in Q4FY19 from 2.76 in Q3FY19. It was 2.5 per cent in Q4FY18.
 

LOAN GROWTH AND NPA PROVISIONS
 

PNB is expected to report a loan growth of nearly 2 per cent on, both, yearly and sequential basis at Rs 442.4 crore. The advances were Rs 433.7 crore in Q4FY18 and Rs 434.4 crore in Q3FY19.
 

Of the previously extended loans, slippages are expected to rise by 0.3 per cent to Rs 4,000 crore from Rs 3,988 crore logged in the December quarter of FY19. The gross non-performing asset (GNPA) is expected to slip 126 basis points (bps) QoQ to 15 per cent, while net non-performing asset (NNPA) is estimated to fall 60 bps sequentially to over 7 per cent.
 

The provisions for NPAs are also expected to fall by 85 per cent y-o-y at Rs 2,917.9 crore from Rs 20,353.1 crore (Q4FY18). On a sequential basis, provisions are expected to rise by 6 per cent from Rs 2,753.8 crore, according to analysts at Prabhudas Lilladher.  
 

“Recent capital infusion (by the government) will help (to reduce) provision and provision coverage ratio (PCR) enhancement,” said Edelweiss Securities in a results preview note. 
 

The government had recently infused Rs 5,908 crore as capital into the bank on a preferential basis.
 

NET PROFIT
 

Analysts are projecting net profit between a range of Rs 249.4 crore and Rs 358.5 crore for the recently concluded quarter against a profit of Rs 246.5 crore clocked during the December quarter.
 

Prabhudas Lilladher, however, expects a 330 per cent jump in profit after tax (PAT) sequentially on the back of “strong recovery/upgrades trends”.
 

The bank had posted a loss of Rs 13,416.91 crore in Q4FY18.
 

MERGER COMMENTARY
 

Management’s commentary on merger with two other PSBs would be watched by investors. PNB is expected to be the next anchor bank to make way for a three-way bank merger. Media reports suggest that the government started ground-work for the next round of merger last month and is likely to materialise it by October. According to reports, Syndicate Bank, Oriental Bank of Commerce, Andhra Bank, and Allahabad Bank are some of the banks being considered to be merged with PNB.