PNB rises 3% ahead of Q3 results, nod to raise Rs 1,000 crore via bonds

Among the key monitorables, analysts would watch out for an update on integration and merger of United Bank of India and Oriental Bank of Commerce with PNB.

Shares of Punjab National Bank rose up to 2.7 per cent to Rs 58.9 on the BSE on Tuesday ahead of its December quarter (Q3FY20) results due later today. Besides, the bank’s Board yesterday approved raising funds through issuance of bonds.

“Board of the Bank in its meeting held on February 3, 2020 has granted permission for raising funds through issuance of Basel-III compliant Tier-II Bonds amounting up to Rs 1,000 crore in one or more tranches,” the bank said in a regulatory filing. READ FILING HERE

Previously, in December, the bank had agreed to raise Rs 1,500 crore by issuing Basel III compliant bonds for business expansion. 

At 9:50 am, the shares were trading 1.7 per cent higher at Rs 58.35 apiece, as against a 1.13 per cent rise in the benchmark S&P BSE Sensex. 

The bank is slated to report its Q3FY20 numbers today amid expectations of rise in net profit on the back of recovery from National Company Law Tribunal (NCLT) and lower slippages.

“PNB, similar to other corporate banks, should see benefit from recovery from NCLT and slippages should be slightly lower as last quarter impact was from daily tagging of NPAs and hence credit cost will come off and see improvement in provision coverage ratio (PCR),” wrote analysts at Prabhudas Lilladher in a results preview note.

They project a jump of 162 per cent in the net profit at Rs 646.1 crore for the recently concluded quarter, as against a profit of Rs 246.5 crore logged in the corresponding quarter of the previous year (Q3FY19). During the September quarter of the current fiscal, the bank reported a profit of Rs 507.1 crore. 

Further, they see the provisions coming down to Rs 2,544.5 crore during the quarter under review, a decline of approximately 8 per cent year-on-year (YoY) from Rs 2,753.8 crore set aside in Q3FY19, and 13 per cent sequentially from Rs 2,928.9 crore in Q2FY20.

Meanwhile, those at Motilal Oswal Financial Services (MOFS) project the “business growth to remain muted, but expect strong recoveries on resolutions in large accounts”.

They estimate the state-owned bank’s credit book to stand at Rs 4,58,400 crore, up from Rs 4,27,900 crore logged in Q2FY20, and Rs 4,34,400 crore in Q3FY19. Besides, deposits are seen at Rs 6,98,000 crore in Q3FY20, almost flat sequentially, and up from Rs 6,50,400 crore in Q3FY19.

The gross non-performing assets (GNPA) ratio is seen between 15.7 per cent and 16.27 per cent.

According to analysts at Edelweiss Securities, the bank’s core profitability may continue to be on a soft terrain, as divergence is likely to negate benefits from Essar Steel resolution.

“With nearly 10 per cent of the book being rated BB and below, asset quality is likely to continue to remain volatile. Moreover, recognition and deferment of provision on frauds (Bhushan Power) of Rs 2,580 crore, out of which only Rs 650 crore was recognised in Q2FY20, will lead to elevated credit cost henceforth,” it said in a result preview.

The analysts at the brokerage estimate the bank’s PCR to come between 60 and 65 per cent. They, however, expect the net profit to rise a whopping 338 per cent YoY to Rs 1,079.1 crore in the recently concluded quarter. Sequentially, the number is seen higher by 112.8 per cent. 

That apart, analysts at Emkay Global estimate the net interest income (NII) to rise marginally to Rs 4,370.7 crore during the quarter under review, up 1.9 per cent YoY and 2.5 per cent QoQ. 

Among the key monitorables, analysts would watch out for an update on integration and merger of United Bank of India and OBC with PNB.

Under the mega merger plan announced by the Union Finance Minister Nirmala Sitharaman last year, 10 PSBs are being merged into four. Punjab National Bank, Oriental Bank of Commerce, and United Bank of India will combine to form the nation’s second-largest lender.