PNB on a positive note

Punjab National Bank’s (PNB) flat profit notwithstanding, its June ’06 quarter results had some positive surprises. Its net profit was constrained by one-time charges due to depreciation in investments. On the operational side, however, net interest margin was up by 25bps YoY on the heels of a 38% expansion in credit.

Adjusted for one-time investment transfers, operating profit was up by 36% YoY. PNB took a hit of Rs 386 crore due to transfer of securities to the held-to-maturity category. Core other income rose by 43% on products based on its banking tool and other credit-related products.

Net interest margin was up by 10bps sequentially, as the bank has liquidated excess SLR investments, and utilised it to fund asset growth. This is evident from a 16% rise in deposits and a 15% fall in investments, while advances have risen by 37%.

Operating expenses have remained stable, with a marginal fall in staff expenses mainly due to change in actuarial provisioning. Retail credit’s share has risen to 23% of the assets portfolio. The company does not think the current growth rate in advances as sustainable, and would be more comfortable with a rate of 23%.

It can manage that growth largely on its current resources. That will ensure profitability is relatively unaffected, even if it may limit credit growth during the year.