Punjab National Bank

COMPILED BY :-
SIDDHARTH C SHAH
ABHIMANYU CHOUDHARY
NEHA SHARMA
ANJUM GOYAL
Punjab National Bank
 The performance highlights of the bank in terms of
business and profit are shown below
Parameters Mar'09 CAGR (%)
Mar'09 Mar'10

Operating Profit 4006 5690 22.29

7326

Net Profit 2049 3905 23.98

3091

Deposit 166457 209760 249330 14.42

Advance 119502 154703 16.01

186601

Total Business 285959 364463 435931 15.09

 Punjab National Bank : ‘ Most
efficient public bank ’
1) PNB’s loan growth is set to remain robust at 25% in FY11 .
2) NIMs, after being resilient in Q4 FY11, are anticipated to
witness a modest correction .
3) In the longer term, PNB sees NIM at 3.5-3.7%, a conservative
band in our view.
4) RoA and RoE are estimated to remain impressive at 1.3-1.4% and
23-25% respectively over FY10. We expect the bank to
deliver a 20% PAT CAGR in the aforesaid period.

 Key Financial Points
Years 2006 2007 2008 2009 2010
Net 1 , 439 . 31 1 , 540 . 08 2 , 048 . 76 3 , 090 . 88 3 , 905 . 36
profit
Years 2006 2007 2008 2009 2010
EPS 45 . 65 48 . 84 64 . 98 98 . 03 123 . 86
Years 2006 2007 2008 2009 2010
Net 310.53 383.89 505.09 694.81 777.82
operatin
g profit
per
share
Years 2006 2007 2008 2009 2010
Deposit 119,684.9 139,859.6 166,457.2 209,760.5 249,329.8
2 7 3 0 0

Years
Operatin 2006
57.00 2007
74.53 2008
109.81 2009
151.48 2010
191.63
g profit
per
share
Years 2006 2007 2008 2009 2010
Return 17.010 16.03 19.00 23.52 24.06
on net
worth

Years
Return 2006
0.99 2007
330.97 2008
390.68 2009
464.75 2010
562.09
on asset
includin
g
revaluat
ion
 A Fundamental Approach
Towards PNB
 4 FY11; could witness modest correction in
the medium term
 PNB does not see its NIM being materially impacted in the near
term and expects a rather modest correction of 10-15bps over the
next two quarters from current level of 4% (post adjusting for
one-time interest income in Q3 FY11).
 Over the longer term, bank expects NIM to settle in the range of
3.5-3.7%. We believe this margin outlook is conservative given
bank’s superior CASA and higher proportion of floating advances.
Traditionally, PNB’s margin management has been much better than
other PSBs.



How does a Fundamental
Approach LEADS ?
Capital adequacy comfortable to
support long term growth
RoA to remain at impressive 1 . 3 - 1 . 4 %;
in - line with some high quality
private banks
 Yoa may see a decent uptick
over the next two quarters

 Over the past six months, PNB has increased BPLR by 200 bps
and Base Rate by 150 bps.
 It is expected to improve by 15-20bps in Q4 FY11.
 As a significant portion of these increases was announced in
December and January, the reported YoA was flat QoQin Q3
FY11.
 81% of the bank’s advances are floating - 59% linked
to BPLR and 22% linked to Base Rate – and therefore get
immediately re-priced.

 Rural branches take more time to
breakeven

 While urban branches turn around in the first year of

operation, the bank says its rural branches take 2-3
years to break-even despite significantly lower
overheads.
 The break-even period for rural branches is elongated by
substantially lower interest income and time lag
(typically 6-month) in receiving interest subvention
from the government
 Also, rural depositors usually park money in longer term
deposits fetching higher rates.

 Additional pension provision for
retirees in Q4 FY11 ; contemplating on
reversing gratuity provisions
 About 35,000 of PNB’s employees have opted for pension 2nd
option.
 The pension liability towards this got crystallized at Rs36bn
(earlier estimated Rs25bn) in FY11. Resultantly , the bank
increased pension provisioning to Rs2.35bn from Rs1.25bn in
Q2 FY11 to take
 Annual provisioning to Rs 7.2bn .
 However, like other banks, PNB is contemplating on reversing
substantial gratuity provisions made during the year

GRAPHICAL REPRESENTATION