Punjab National Bank (PNB) is scheduled to report its April-June quarter numbers for the fiscal year 2019-20 (Q1FY20) today amid expectations of a subdued performance. Most analysts expect the bank to report loss in the recently-concluded quarter coupled with a fall in the net interest income (NII). Asset quality, however, is likely to see an improvement, they say.
The bank reported a loss of Rs 940 crore in the same quarter of the previous fiscal (Q1FY19) and that of Rs 4,749.6 crore in the quarter ended March, 2019 (Q4FY19). The NII stood at Rs 4,691.9 crore in Q1FY19 and at Rs 4,200 crore in Q4FY19.
Here is what leading brokerages expect -
The brokerage firm expects the lender to report weaker numbers in terms of NII and net interest margin (NIM) owing to slowdown in the credit growth. The bank is expected to post better gross non-performing asset (GNPA) ratio, down by 233 basis points (bps), from 18.26 per cent in Q1FY19 to 15.93 per cent in Q1FY20.
“PNB is likely to continue to suffer from capital issues and hence loan growth could be muted, while other operating metrics are likely to be weak. Bank has been able to post strong recovery/upgrades in FY19 which are also very crucial in FY20 to improve asset quality ratios and earnings improvement,” it said in a results preview note.
Analysts at Phillip Capital, too, expect the bank to report dismal quarterly performance. They peg the NII at Rs 4,316.5 crore, down 8 per cent, YoY. Furthermore, they expect the bank to report a loss of Rs 1,006.9 crore.
The analysts warn of elevated credit costs due to higher levels of GNPAs. They estimate the GNPA ratio at 15.1 per cent and net NPA (NNPA) ratio at 5.9 per cent.
The slippages, however, are estimated to be at Rs 4,000 crore, down 45.7 per cent YoY and 45.2 per cent sequentially.
It expects PNB to post a 14.7 per cent decline in pre-provision profit at Rs 3,577 crore. However, it sees a net profit of meager Rs 170 crore.
“Recent news on residual stress from old NPAs may be near term overhang, also business momentum is expected to be soft (albeit improving). However, treasury gains should help, asset quality performance and profitability will be keenly monitored,” they wrote in an earnings preview note.
Motilal Oswal Financial Services
The brokerage would watch out for the management’s commentary on the growth outlook, NIMs and CASA (current account-savings account) performance of the bank.
“We expect loan growth to come in at 12 per cent YoY and deposits growth at around 9 per cent YoY. NII growth is also expected to decline by 8 per cent annually,” they wrote in their result preview note adding that stress addition could decline to 4.1 per cent (annualized) but still remain elevated.
The expected credit cost is at 18bps for 1QFY20 along with an estimated loss of Rs 196.3 crore. “Outlook on asset quality, as net stressed loans remain one of the highest in the industry,” they said.
Analysts at the brokerage firm expect the public sector lender to continue being in the red and report a loss of Rs 905.8 crore.
“Business momentum is expected to be softer (albeit improving). The asset quality performance is likely to show some improvement… That said credit cost will be higher,” they wrote.