PNB/Punjab National Bank’s Q2 results a glimmer of hope for its investors

In the March quarter, Punjab National Bank (PNB) earned notoriety by reporting the largest quarterly loss by any Indian lender. Since then, the public sector bank has swung back into profit and showed a net profit of Rs549 crore in the September quarter.

The 11% drop in profit for PNB was largely expected by most analysts and some had even expected a loss in the second quarter. So was the muted growth in advances, and a fall in net interest income.

The state-owned bank’s historic loss of Rs5,370 crore in the March quarter was on the back of a phenomenal rise in bad loans and provisions for the same. The quarters that followed haven’t been merciful.

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In the September quarter too, gross non-performing assets continued to stay above 13% and the stressed asset ratio remained a massive 18%.

Write-downs have escalated indicating that the lender’s war room in bad loans is not getting much luck in resolution.

But there is a silver lining, in fact several of them.

Firstly, the bank’s fresh slippages have reduced to Rs5,089 crore in the September quarter from Rs7,533 crore in the previous quarter. Its cash recoveries have risen and so have upgrades.

PNB has consciously shrunk its exposure to large companies, especially infrastructure. All this shows the bank’s war-room executives have not been twiddling their thumbs.

But much of this is perhaps factored in by the increase in the bank’s stock price over the last three months. Since the announcement of its June quarter results, shares of PNB have gained about 6%, a lot of it helped by beaten down valuations compared with peers such as State Bank of India and Bank of Baroda.

Since one quarter does not a trend make, investors would best sit tight to see whether the lender repeats the performance in the coming quarters.