Excerpts below of Religare Capital Markets’ (Institutional Team) Q2 earnings highlights of Punjab National Bank Ltd. by Parag Jariwala, CFA, VP – Institutional Research, Banking and Financial Services, Religare Capital Markets Limited.

Mumbai, 5 Nov, 2016 (GPN) :

Slippages decline on a sequential basis: Total slippages declined to Rs62bn (Rs51bn fresh slippages and Rs11bn debit to existing NPA accounts) from Rs 92bn in Q1. Cash recovery / up-gradation / write-offs stood at Rs 29bn / Rs19bn / Rs16bn. Given the lower slippages, GNPA declined to 13.6% from 13.8% in Q1. Reported coverage ratio was stable QoQ at 37%. Restructured std assets too declined marginally to Rs180bn (4.4% of loans) vs. Rs189bn last quarter.

 Loan growth stays muted; Margins improve QoQ: PNB’s loan growth was muted at 3.4% YoY largely on account of decline in corporate book. However, growth in retail advances was strong at 22% and management continued to lay emphasis on small ticket advances which grew by ~12% in Q2. Share of small ticket advances has increased to 58.6% from 56.2% in Q2FY16. Global NIMs improved by 6bps QoQ to 2.51% largely on account of reduction in cost of deposits. High cost deposits declined by 37% QoQ to Rs 4bn while CASA ratio improved by 70bps QoQ to 42.1%.

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• Other highlights: Growth in non-interest income was strong at 76% YoY driven by 15% growth in fees and trading gains worth Rs 6.5bn. Provisions stood at Rs 25bn (vs. Rs 27bn in Q1FY17 and Rs 19bn in Q2FY16). Operating profits grew by 13% YoY to Rs 33bn. Net profit declined by 12% and stood at Rs 5.5bn.