Aided by lower credit cost, Punjab National Bank (PNB) is expected to report strong year-on-year earnings growth for the second quarter on Thursday.However, sequentially, there will be only a a marginal improvement in bottomline , say analysts.

PNB is expected to better its first quarter standalone net profit of ₹1,255 crore, which was the highest quarterly net profit recorded by the bank in the last 12 quarters.

Much would depend on recovery of non-performing loans, where PNB still lags its public sector peers, analysts noted.

Rahul Malani, Research Analyst, Sharekhan said: “We believe PNB is likely to sustain a strong performance in Q2FY24 in line with Q1. Credit growth is expected to pick up in Q2 vs Q1, but NIMs are expected to moderate marginally on q-o-q basis. However, strong asset quality would lead to lower credit cost, which would be the main driver of earnings growth. We expect PAT at ₹1,264 crore (up 208% y-o-y/ 1% q-o-q).”

Also read: No plans to sell stake in Canara HSBC Life Insurance, says PNB Chief Goel

While credit growth for the quarter under review is likely to continue at a robust 13.8 per cent (14.6 per cent year-on-year in Q1), deposit growth may have slipped toabout 9.7 per cent, as compared to 14.2 per cent growth seen in the first quarter, a recent report from B&K Securities showed.

For the entire fiscal 2022-23, PNB recorded a net profit of ₹2,507 crore. In the March 2023 quarter, it had reported net profit of ₹ 1,159 crore.

Going by the performance so far, PNB is expected to comfortably achieve its guidance of ₹4,000 crore net profit for the current fiscal, say analysts.

Rati J Pandit, Lead Analyst – Banking Sector, Nirmal Bang Institutional Equities, said: “According to provisional numbers, the bank’s credit and deposit growth stood at 13.9 per cent and 9.7 per cent YoY. Considering that deposit growth lags credit growth, coupled with the fact that the bank has ample liquidity, with a high LCR of 159.5 per cent and excess SLR of 6 per cent as of June 30, 2023, its C/D ratio has improved from 69.6 per cent in 2QFY23 and 70.6 per cent in 1QFY24 to 72.2 per cent in 2QFY24, and its CASA ratio has improved from 40.9 per cent to 41.1 per cent sequentially. It is expected to have used some part of excess liquidity on its balance sheet to grow its loan book. 

Hence, it is expected to report a healthy performance at the operating level, with stable/ improved NIM (3.08 per cent reported NIM in 1QFY24). PAT is expected to grow by 207 per cent YoY to ₹1,260 crore, aided by lower credit costs. Management commentary on growth, margins and quality of unsecured loan exposures will be key to listen to”.