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Punjab National Bank - 4QFY2012 Result Update - Angel Broking
Posted On : 2012-05-11 10:01:03( TIMEZONE : IST )
For 4QFY2012, PNB registered a moderate set of numbers on the operating front. However, the asset quality deteriorated considerably during 4QFY2012 with higher slippages and sharp jump in restructured accounts. We recommend a Buy rating on the stock.
Significant deterioration in asset quality during 4QFY2012: For FY2012, the bank's business growth remained at healthy levels, with both advances and deposits growing by 21.3% yoy each. Current account deposit accretion picked up during 4QFY2012 with a growth of 22.4% qoq (up 6.1% yoy), however savings accounts growth was moderate at 2.9% qoq (up 13.0% yoy). Reported CASA ratio on a qoq basis remained stable at 36.2%. The bank's yield on advances declined by 43bp qoq on account of interest rate reversals amounting to Rs.125cr (effect of 38bp). The bank's cost of deposits also increased marginally by 6bp qoq on account of higher cost of borrowings on bulk deposits during the quarter. The bank's yield on investments also came down qoq by 22bp on account of selling of higher yielding HTM securities to RBI during its OMO operations.
Consequently, the reported NIMs of the bank declined by 38bp qoq during 4QFY2012. The bank's asset quality deteriorated significantly during 4QFY2012, with gross and net NPA levels increasing by 35.4% and 53.5% sequentially, respectively. The bank's restructured book jumped up by 48.1% qoq, primarily on the back of restructuring of SEBs (~Rs.3,800cr) and Air India (Rs.2,200cr) during 4QFY2012. Provisioning coverage ratio deteriorated by over 700bp during 4QFY2012 to 62.7%.
Outlook and valuation: The bank's valuations are currently at low 0.8x FY2014 ABV compared to its five year range of 1.1-1.6x and median of 1.4x, due to the asset quality concerns facing the sector. Taking into account the bank's relatively lower cost of deposits than peers and valuations at the lower end of its historical trading range, we currently have a positive stance on the bank. Hence, we recommend a Buy rating on the stock with a target price of Rs.1,117.
