Punjab National Bank (PNB) delivered Q4FY08 results, which were ahead of our expectations. The net profit rose 128.8%, whereas net interest income (NII) grew at 12.6%.PNB appears to have consolidated on its gains from 3Q08 and despite an aggressive loan growth, improved both margins and asset quality.
NIMs for the quarter were 366bps (up 10bps qoq) – a surprise and a contrast to most PSU bank peers. Margins could, however, come under some pressure due to aggressive loan growth (+18%qoq), and its relative disadvantage in a declining interest rate situation as its deposit repricing could be slower than peers.
PNB’s NPLs have declined 22% qoq – a combination of higher recoveries and little pressure from its relatively large agriculture portfolio (contrary to expectations). Loan loss provisioning was also lower (excl Rs1bn floating provision) and coverage levels jumped to an impressive 77%.
The bank reported an EPS of Rs 64.98 for FY08. EPS estimates for FY09 and FY10 are Rs 76.88 and Rs 91.20 respectively.