Punjab National Bank

NSE:PNB

Earnings Call Analysis

PNB Achieves Significant Growth and Improved Profitability

Punjab National Bank reported a robust first quarter with total business reaching INR 24.39 trillion, up 10%. Deposits grew by 8.5% to INR 14.08 trillion. Credit growth was strong at 12.2% year-over-year, reaching INR 10.28 trillion. The net interest income rose by 10.2% to INR 10,476 crores, while operating profit increased by 10.3% to INR 6,581 crores. The bank maintained a healthy capital adequacy ratio, not counting quarterly profits. Looking ahead, PNB is focused on sectors like retail, agriculture, and MSME, with an aim to reach a 1% Return on Assets by the end of FY '25.

Introduction

The management team of Punjab National Bank (PNB) presented the results of a robust first quarter for FY25, demonstrating strong performance across various parameters including business growth, profitability, and asset quality.

Strong Business Growth

PNB achieved a total business volume of INR 24.39 trillion, marking a 10% year-on-year (YoY) growth. Deposits grew by 8.5%, reaching INR 14.08 trillion. On the credit side, the bank saw a commendable growth of 12.2% YoY to INR 10.28 trillion, with a quarter-on-quarter (QoQ) growth rate of 4.6%.

Profitability Boost

The net interest income for the quarter increased by 10.2%, amounting to INR 10,476 crores. Operating profit surged by 10.3% YoY, reaching INR 6,581 crores. Net profit saw a significant increase of 159%, rising to INR 3,252 crores, marking the highest profitability figures for PNB in the last four years.

Enhanced Asset Quality

Gross Non-Performing Assets (NPAs) were reduced from INR 70,899 crores to INR 51,263 crores, lowering the gross NPA ratio from 7.73% to 4.98%. Net NPAs also saw a significant decline from INR 17,129 crores to INR 5,930 crores, improving the net NPA percentage to 0.60% from 1.98% a year ago. The Provision Coverage Ratio (PCR) improved from 89.83% to 95.90%, significantly reducing credit costs.

Revised Guidance

Given the strong performance, PNB revised its guidance for gross NPAs to be around 4% by March 2025, down from the previous guidance of 5%. The credit cost guidance was also revised from 1% to 0.5% for the year, reflecting improved asset quality and recovery expectations.

Capital Position

PNB's capital adequacy ratio stood at a solid 15.79% with a Common Equity Tier 1 (CET-1) ratio of 10.95%. The bank revised its capital raising plans, reducing the Tier 1 capital target from INR 7,500 crores to INR 5,000 crores for the year, while maintaining the target for Tier 2 capital at INR 3,000 crores.

Operational Efficiency

The cost-to-income ratio improved from 56.09% in the last quarter to 53.28%, due to reduced AS-15 provisions. The Net Interest Margin (NIM) guidance was maintained at 2.9% to 3%, reflecting consistent profitability.

Sectorial Performance

Growth in various sectors was substantial: RAM (Retail, Agriculture, MSME) growth was 13%, MSME sector grew by 7.92%, agriculture by 15.75%, and retail by 14.93%. Efficient underwriting was reflected in low NPAs across these sectors, with retail NPAs at just 0.27% and agriculture at 0.52%.

Recovery and NCLT Cases

PNB reported a strong recovery performance, with INR 3,249 crores recovered in the quarter. Provisions and recoveries from National Company Law Tribunal (NCLT) cases are expected to contribute significantly, with an estimated INR 1,200 crores in the next quarter and a total of INR 3,000 crores for the year.

Digital Transformation

PNB is focused on digital transformation, with an INR 2,800 crore budget for IT expenditure. Over 100 products and services have been digitized, aiming to future-proof the bank against industry shifts and enhancing customer engagement through digital channels.

Earnings Call Transcript 2025-Q1

[Prakhar Agarwal, analyst]

Ladies and gentlemen, good day. On behalf of Elara Securities, I would like to welcome you all to the Q1 FY '25 Earnings Conference Call of Punjab National Bank.

We have with us the senior management team of Punjab National Bank, represented by MD and CEO; Mr. Atul Kumar Goel; Executive Director, Mr. Kalyan Kumar; Executive Director, Mr. Binod Kumar; Executive Director, Mr. M. Paramasivam; and Executive Director, Mr. Bibhu Prasad. [Operator Instructions] Please note that this conference is being recorded.

With this introduction, I would now like to hand the conference over to the management of Punjab National Bank.

[Atul Goel, executive]

Thank you very much, Prakhar. Good afternoon to everybody. I welcome all the person from the analyst team, other team also welcome to the -- this conference call of the Punjab National Bank for First Quarter Results June 24 Quarter. I will give my brief about the results. Then I will be asking any questions which you want to ask me whatever the doubt in our mind also.

This is a very good quarter as far as results of the Punjab National Bank is concerned in all the parameter, whether it is business, whether it is a profitability whether it is the asset quality. First time we have achieved the total business of the INR 24 trillion. The business growth, this is increased to INR 24.39 trillion with a growth rate of 10% and deposit growth INR 14.08 trillion, with the growth rate of the 8.5%.

As far as the gross credit growth is concerned, that is a very, I think, a robust growth, INR 10.28 billion. We've achieved the credit with a growth rate of the 12.2% Y-o-Y. And if you see the quarter-on-quarter, it is a 4.6% and if we annualize the quarterly growth, it is coming more than 18%. So this is good growth as far as the CD ratio, that is a very comfortable position, 73.05%. There is a growth in the saving bank, also CASA is the challenge for the banking industry. But saving bank, there was a positive growth. It was INR 4,84,377 crore, as against the figure of INR 4,64,000 crores (sic) [ INR 4,64,004 crores ] in the last year, June '23 quarter as against the INR 4.80 trillion in the last quarter. So there is a growth in the -- from the June '23 quarter as well as the March '24 quarter.

As far as RAM is concerned, there is a growth in the RAM also. And the percentage of the RAM to the total credit has also increased. It was in last year of the corresponding year quarter 54.74%, which has improved to 55.46%, even it is better than 55.18% in the last quarter, March quarter.

As far as the profitability is concerned, the net interest income increased to INR 10,476 crores with a growth rate of 10.2%. As far as operating profit is concerned, it has increased to INR 6,581 crores with a growth rate of 10.3% Y-o-Y. And net profit, there was a growth of 159%.

Last year, this same quarter, [ June '23 ] quarter, the profit was INR 1,255 crores. It has increased to INR 3,252 crores with a growth rate of 159%. And if compared with the last quarter, the last quarter also, there is -- it was INR 3,010 crores. So 8% growth only quarter-to-quarter. And one thing I want to highlight to all of you. This NII, this operating profit and the net profit number of the INR 10,476 crores, INR 6,581 crores, INR 3,251 crores (sic) [ INR 3,252 crores ] is the highest in the history of the Punjab National Bank in the last 4 years after the amalgamation of the 2 more banks.

As far as asset quality is concerned, the gross NPAs used to be around INR 70,899 crores year ago in June '23, and it reduced to INR 51,263 crores and the percentage of the gross NPA, which used to be around 7.73% in June '23 quarter has reduced to 4.98%. And this last quarter, March quarter, it was 5.73%. So there was around 75 basis points reduction from the quarter-to-quarter.

Net NPA, which used to be INR 17,129 crores reduced to INR 5,930 crores and the NPA percentage -- net NPA percent 1.98% June '23 reduced to 0.60% and in the last quarter -- March quarter, it was 0.73%. The PCR, it was -- improved from 89.83% 1 year back to 95.90%.

And the credit cost, credit cost last year, June '23, it was 1.99%. And last quarter, March it was 0.81%. The figure of the provision of the last June '23 quarter, INR 4,374 crores; March '24, it was INR 1,958 crores. And June '24, it is [ INR 859 crores ], it is a 0.33%. The credit cost has reduced drastically because there is 2, 3 things. So provision has already improved 95% and recovery every quarter, either double or sometimes triple also. If you see the last year also, the recovery was more than triple also. This is one of the reasons. And we are revising the guidance for 2 numbers.

Last time, we have given the guidance for the gross NPA, it will be 5% by the end of the March '25. So since we have already achieved 4.98%, we are revising, it will be around 4%. Similarly, credit cost, which is the one of the major factors for the profitability is concerned. We had given the guidance for the 1% for the whole of the year. Since we have already 0.33% and 95.33% in this current quarter, we are revising it 0.5% for the whole of the year. Because I'm seeing time will come where there will be a reversal also because as I told you, see if there is a recovery, recovery 60%, 70% will be the right bank and the new addition, we have to provide 20%. So time will not far when we see the reversal in the credit cost also. But as we are giving the guidance of 0.50% is concerned.

As far as capital is concerned, 15.79% is the capital, Tier 1 (sic) [ CET-I ] 10.95%, AT-I 2.09%, Tier 1 13.04% and Tier 2 is 2.75%.

As far as capital plan is concerned, last time I told you, see we have Board approval for INR 7,500 crores, and INR 7,000 for AT-I, INR 1000 crores -- INR 3,000 for the Tier-2, total INR 17,500 crores. Today, because as I told you, capital -- we are adequately capitalized so instead of the INR 7,500 crores, we will reduce this quantum from INR 7,500 crores to INR 5,000 crores for this particular year. And INR 10,000 crores will remain unchanged for the Tier 1 and Tier 2 is concerned.

As far as cost of deposit is concerned, cost of deposit is 5.08%. It was 5.06% in the last quarter. And the yield on advance 8.43%, last quarter it was 8.54%. And last year, it was 8.13%.

As far as NIM is concerned, NIM, 3.21% for the domestic and 3.07% for the global. And we have given the guidance of 2.9% to 3%. And I think we will give -- this same guidance we will give you.

As far as cost-to-income ratio is concerned, this is a very important ratio, cost-to-income ratio. It was 56.09% in the March quarter, last quarter. The reason was, we have explained in the last quarter also because on account of the base revision the AS-15 provision was INR 2,396 crores in March '24 quarter. It has reduced to INR 742 crores. And it will remain in the same line basically, it will not further increase. So this was the reason to reduce the cost-to-income is from 56% to 53.28%. And last year June '23, it was also in the same line, 53.87%.

As far as -- as I told you, the NIM, et cetera also, the guidance will remain unchanged. Movement of NPA, I would like to tell one thing, the recovery, as I told you, is INR 3,249 crores for this quarter. This is the recovery including the technicality as well as the some interest has been moved in the interest income. Because entire amount is not deducting in the movement of the NPA also. The remaining amount, which is in addition to the TWO and the recovery of the disorganizing debt that is coming in the movement.

The slippage, INR 1,755 crores slippage. It is the 0.76%. We have given the guidance for the 1%. We are not revising our guidance. But this slippage is the least slippage in the last 12 quarters. Last [Foreign Language] INR 1,755 crores and it will remain within the 1%, that will remain the same. As far as this SMA 0, 1, 2 is concerned, total SMA 0, 1, 2 was [ INR 1,01,883 crores ] INR and the INR 5 crore and above SMA2 is hardly INR 1,600 crores.

As far as slippage is concerned, INR 1,700 crores, as I told you. This sector-wise slippage is, this agri INR 399 crores, this MSME INR 637 crores (sic) [ INR 638 crores ], retail INR 493 crores, others INR 89 crores, others means corporate, et cetera. And existing account INR 102 crores, so INR 1,755 crores, the highest NPA also in this quarter the INR 89 crores. Otherwise, if you see the first 5, 6 highest NPA of this quarter, the first is INR 89 scores and the fifth is only INR 7 crores, so this is the improved -- quality has been improved too much.

So as far as growth is concerned, growth, as I told you, business, 12.20% is the credit growth, domestic it was 11.56%, RAM it was 13%, MSME 7.92%, agriculture 15.75%, retail 14.93%. So this is about the growth and the slippage [indiscernible] I have already discussed with you. One more thing I would like to tell you, which normally I give every quarter, how the new underwriting is behaving? The data of the -- from the 1st of the July '22, 30th July '24, it is a data of 4 years, 48 quarters data.

This INR 8.3 trillion, we have sanctioned, INR 7.49 trillion we have disbursed, outstanding in the INR 5.93 trillion. The NPA in this new underwriting of the last 4 years, INR 2,276 crores, which is coming around 0.30%. I will give the sector wise also, out of 0.30%, retail, it is 0.27%, MSME 1.54%, agri 0.52%.

As far as capital, I already discussed, I will give more data, really you may be interested in data because on account of the worry from the regulatory side also. Unsecured loan, unsecured loan in the retail is INR 27,630 crores only, out of which, INR 938 crores is the credit card. Education loan is the INR 4,219 crores, personal loan against pension is INR 4,451 crores, and personal loan apart from the pension loan is INR 18,022 crores. So it is INR 27,630 crores. Out of this INR 18,022 crores, PAPL, digital INR 4,307 crores, nondigital, INR 13,750 crores. The NPA in this PAPL, either digital or the nondigital is less than 2%, it is around 1.86%.

One more thing because there is a change in the guidelines for the valuation of the investment, which was effective from the 1st of the April 2024, whatever the unrealized profit on the bonds or the G-sec or the equity, it was INR 2,099 crores net of tax. Please note INR 2,099 crores, net of cash. Otherwise, gross was INR 3,155 crores, but net of tax has been added only in the INR 2,099 crores. Out of which INR 3,155 crores, INR 2,582 crores was the unlisted stock, which is not allowed to be used for the capital computation. CET-I only INR 573 crores is the gross, but INR 373 crores net of tax has been added only in the CET-I. I'm again repeating INR 373 crores added in the capital net of tax for the CET-I calculation, otherwise, INR 2,099 crores net of tax has been added in the general reserve.

As far as the other thing is concerned, the investment 73.59% in the HTM and everything has been mark-to-market also. Retail, I already -- RAM as already discussed 55.46%. It was 55.18% in the March quarter and 54.74%. Our focus on the RAM to leverage the branch network of the 10,000 branches. CASA, I would like to give only one thing because CASA is the challenge for the banking industry, but this is not for the Punjab National Bank 10,000 branches. We are having 24 customers. We are having -- last year, we have opened more than 1 crore account. In this quarter also, 27 lakh accounts we have opened.

Current, last year, we have opened 2.68 lakhs. In this particular quarter, we have opened 54,000. As far as NCLT is concerned, 813 accounts, we have applied of INR 1,04,383 crores, out of which 790 accounts was admitted of INR 1,03,058 crores, 23 accounts remaining to be admitted of INR 1,325 crore, out of which, as on date, 259 accounts [ resolved ] for INR 46,425 crores saving account. 307 account under liquidation INR 34,739 crores. 224 accounts pending at various stages for INR 21,894 crores.

As far as recovery in the NCLT is concerned, last year, first quarter, INR 566 crores, second quarter INR 556 crores, third quarter INR 1,831 crore, INR 648 crores in the last quarter. Total recovery was INR 3,603 in first quarter. INR 292 crores we have recovered and we are estimating INR 1,200 crore in the current quarter, September quarter, INR 997 around third quarter, fourth quarter INR 500 crores, so around INR 3,000 crore, we are also estimating in the current financial year also.

And the NARC, 14 accounts, we have transferred of INR 3,778 crores, out of which INR 974 crores, we've realized by way of SR as well as the cash and 9 account under discussion for the outstanding of INR 1,549 crores, modified duration of the investment of AFS and HFT is INR 3.61 crores. And for total portfolio is INR 4.76 crores. So I'm trying to cover all the basic main thing of the financial results. And I think whatever we have promised last quarter, we have tried to deliver that also.

Again, I'm repeating the guidance. The credit growth, we have given the guidance 11% to 12%. We have achieved 12.20% and we are not revising. Deposit growth, 9% to 10%, 8.5% we have achieved. CASA share, we have around 42%. It was 40.8%. Operating profit, 10% to 11% (sic) [ 12% ], we have achieved 10.27%. NIM, net interest income, around 10%, we have achieved 10.23%. NIM 2.9% to 3%, we have achieved 3.07%. Gross NPA, we have given the guidance less than 5%. We have already achieved 4.98%. We are revising it to 4%.

PCR 95%, 95.90% already we achieved, so this will remain in the same range 95%. Credit cost, definitely, credit cost, we have given the guidance for the 1%, actual is the 0.33. We are revising to 0.5%. Although time will come, there will be a reversal because if you see the recovery is more than the slippage sometimes 2x, 3x and 95% is the PCR. No much requirement for the aging provision. But we are revising to 1% to 0.5% this is the retail, INR 18,000 crore recovery target, and we are confident definitely although recovery in the first quarter on account of this election, on account of the transfer posting involved, more than 50% staff in the branches was involved in the election process also.

So this was a little bit on the lower side, INR 3,249 crores, but definitely we will be achieving much more than in the full of the financial year, INR 18,000 crores. Slippage as I told you, 1% is the guidance we have given, 0.76% we have already achieved. So I'm not revising these guidelines, we will try to control, but 1% is, I think, a reasonable number at INR 2,000 crore per quarter out of the INR 10 trillion book.

So this is my initial remarks. Thank you very much to all the analyst friends from the [indiscernible]. I thank you for your confidence, which you have reposed in Punjab National Bank, and I hope that will remain continue also. I'm open for any question answer whatever you want clarity in any number, et cetera, which in your mind. Thank you very much.

[Prakhar Agarwal, analyst]

[Operator Instructions] The first question is from the line of Mahrukh Adajania from Nuvama Wealth.

[Mahrukh Adajania, analyst]

Congratulations, sir. Sir, I had a few questions that you yourself mentioned in a brief comment on your annualized credit growth. So is it likely or do you see scope for your credit growth being faster than what you've guided given that your annualized run rate is already high? And do you think there are enough deposits in the system to be able to support any up move in credit growth forecast, if at all, there is any. That's my first question, sir. And then I have a few other questions.

[Atul Goel, executive]

Mahrukh, as far as credit growth is concerned, we had given the guidance of 11% to 12%. We will stick to say 11% to 12%, although we have achieved 12.20%, it is in the same range. 12% we have given the guidance, so I'm not revising. It will remain within 11% to 12% as far as deposit is concerned. I may tell you one thing, the deposit although there is a challenge in the banking industry, I'm not [indiscernible] because there is a gap between the credit growth and the deposit. But as far as Punjab National Bank is concerned, as of it, I'm not forcing any channel because we are having 10,000 branches 24 customers.

As I told you, we have opened more than 1 core accounts last year, more than 27 lakh accounts we have opened, the money will come definitely even because -- if you see my CD ratio, it is 73%. So definitely we are not raising the deposit because bulk deposit is available, but that is costly. But I will use that deposit if I'm not in a position to deploy that deposit [indiscernible] manner. So deliberately we're not taking the bulk deposit. So we are trying to improve the CASA. And as I told you to 73% is my CD ratio, so whatever additional deposit I will raise, I will not be required to maintain on that SLR because I'm sitting on the more than INR 78,000 crores excess as SLR. So I will be in a position to do 100% incremental deposit for the credit growth. So this is my answer of your query.

[Mahrukh Adajania, analyst]

And sir, the new LCR guidelines, have you got a chance, I know you'll be busy with results, but have you got a chance to have any rough impact of the new LCR draft norms I know it's a draft, but based on the draft.

[Atul Goel, executive]

Mahrukh, it is a draft guidance. They have invited comment also. It will be applicable from the 1st of the April '25 next year as on date, my LCR is 125%. We've made a rough calculation also, impact of the -- will be around 10%. So 115% will be the new -- as per the new guidelines.

[Mahrukh Adajania, analyst]

Okay, sir, that's helpful. And sir, one more -- just a few questions on the net interest margin and income. So sir, what was the recovery income this time versus last year first quarter, which is included in NII. And then what was the improvement in yield on investment because of the new investment guidelines, the new investment norms that kicked in, for which your reserves have also increased?

[Atul Goel, executive]

Yes, yes. As far as this interest income in the -- concerning the recovery from the recovery that is in the range of the INR 600 crores to INR 700 crores. And I have seen that data also that is in the same range. This quarter is also between INR 600 crores to INR 700 crores. Even in the June '23 quarter, it was in the same rate. So that remains on the same.

As far as your investment guidance is concerned, I would like to tell you, reserve already I have told you INR 2,099 crores has been added net of tax in the general reserve and mark-to-market is INR 257 crores. That is through P&L.

[Mahrukh Adajania, analyst]

No, that's through other income. Is there any uptick in yield on investment because of the new guidelines, the mark-to-market on investment will be in other income, no?

[Atul Goel, executive]

Mahrukh, if you see my investment deal, it was 6.82%. It is 7.06% because a little bit of saving cost has been revised. If you see that was because unrealized profit has already been added in the asset side. So if you see it is on the higher side, if you will add because you have to break a bit because part is the -- equity part is the bond. Bond, there is no too much uptick because the appreciation which is INR 2,000 is coming, that is on account of the equity because we are aware because there was depreciation in the AFS portfolio, which we have reversed. So there is no impact as far as yield on investment is concerned on account of this revised guidelines.

[Prakhar Agarwal, analyst]

The next question is from the line of Ashok Ajmera from Ajcon Global.

[Ashok Ajmera, analyst]

Compliments to you sir, Atulji. Your hard work of last 2, 3 years has been really paid off, and fantastic set of numbers are given by Punjab National Bank, and it is now firing on all the cylinders once again achieved the past glory. Numbers are really wonderful, fantastic numbers, sir, once again, compliments. Having said that, sir, I have got certain questions and some observations.

Now going ahead, sir, the same question which Mahrukh has raised, like, when you say that you're already 4.5% and above in the credit [indiscernible] 1 quarter itself. And if you analyze it is 18% plus growth is possible, still you're retaining the guidance of only 12%, whereas you said you are comfortable on extra SLR front also even if there is some challenge on the deposit.

So what is stopping you to revise this guidance of the -- on the credit growth, like the way you are going now, can it not be considered like, say, 15%, 16% for FY '25? This is number one.

I've got some -- like you said that the modified duration of the overall investment book, you said is around 4.76x or 4.75x. Don't you think that this modified duration has gone up a little bit high? And are you expecting surely for some rate cuts in the coming quarters so as to take the advantage of this higher duration. This is on the treasury front. And I would also like to hear a little more on NARCL the pipeline recovery to -- certainly recovery pipeline.

And one point on NARCL is that some accounts have already gone and accepted by NARCL. So how much amount of the SR, which we have received on those accounts because they are fully provided for, for the current value. So just to ascertain since it is guaranteed 100% by the government, I mean, one or other day, I mean, that provision will come back, that amount. So these are the few questions and observations on the round one sir.

[Atul Goel, executive]

Okay. Okay. Ajmeraji, I will give one by one. First is the credit growth. Definitely, I told you 4.6% quarterly [indiscernible] 18%, but 1'm giving the guidance for the 11% to 12%. Why I'm giving 11% to 12% because we are the big bank. There is some short-term advance also available in the book because we have to see what is our incremental cost of the deposit, whether we will reprice that advances or not because we're not doing any business where we should not get any [indiscernible] profit also.

So we will not give any [indiscernible] This is the reason, we will not rollover, if we will not get the pricing of our choice. This is the reason. We are stick to 11% to 12%, but definitely, we will try. If opportunity available, business is available, we will definitely do. Deposit is not [indiscernible] deep taste but deposit as I told you, if I think about the , if I will get the deal on the asset side, more than 8%, I will not allow to -- the opportunity to go down.

Suppose I'm getting the asset side on the 8% because [indiscernible] they are asking for the 8%, sometimes less than 8%. What is the benefit to raise the [indiscernible] deposit of the 8% giving the loans to just increase of the top line. So this is the answer of the credit growth.

As far as modified duration is concerned, as I told you, 4.76% is my modified duration for the entire portfolio and 3.61% is the duration for the AFS and HFT. You have told, it has been a little bit increased, definitely. So 3.61% is very reasonable because mark-to-market has to be done on the AFS and HFT, mark-to-market is not to be done for the HTM as on date also because got the revised guidelines also.

As far as -- because I think definitely interest will be declining scenario. Declining scenario, I think you will agree to me, there should be a higher modified revision, but we have kept a reasonable revision. So rate cut, it is very difficult to predict also. We were thinking rate cut will come from the last 6, 7 months, even whatever the inflation number we have seen in the last month also immediately I'm foreseeing there will not be rate cut. [indiscernible] will give their commentary on the 31st of this month also. So even immediately 4 to 5 months, so I'm not expecting any rate cut. But definitely, we have to wait for the regulators call also.

So as far as the NARCL is concerned, this NARCL 14 accounts of INR 3,778 crores, we have sold, out of which we have received INR 974 crores. In INR 974, 15% received. We have received as a case, remaining is the SR, definitely SR is the guaranteed by the government movement, we will get the recovery from the SR, the entire 100% provision will be reversed.

[Ashok Ajmera, analyst]

So about INR 800 crores is about SR which is included in this total SR from NARCL, isn't it sir?

[Atul Goel, executive]

Yes, yes. INR 974, 15% we have got, yes.

[Ashok Ajmera, analyst]

Sir, this new discussion paper on the double provision on the deposits, which are generated through digital media or online. So sir, what is our assessment if that comes in, are we really going to be impacted by much because I don't know the exact mix of the deposits, which are generated through the online media, I mean, digital media. So what is your take on that? And what is -- how do we take care of that?

And the bank's overall position on the digitalization that how far we have succeeded in completing all the verticals, which we started and a good amount has been also spent on the digitalization. So what is the plans and how much budget is there, which is spent, which is yet to be spent? How many verticals started already giving the results?

[Atul Goel, executive]

Ajmeraji, as far as budget is concerned, INR 2,800 crore is the budget for the IT expenditure for the current financial year. And we have started this journey 2 years back and more than 100 product process and service, we have revised. And we are getting the results of the digital transformation also. And digital will -- digital is the future of the banking, whatever you've told on account of this runoff from the 5% to 10% or the 10% to 15%, it is a calculation everybody will be impacted.

We have made our calculation also whatever the deposit will be where we have provided the Internet banking, digital mobile banking, et cetera, even be in another category also deposit less than INR 7.5 crores apart from the individual and the joint NIM et cetera, that is also included. So 125% of our LCR was there, and it will be reduced to 115% around 10% there will be an impact.

[Ashok Ajmera, analyst]

All right. So you don't feel that will create any problem in the liquidity.

[Atul Goel, executive]

Yes, yes, yes. [Foreign Language] calculation. And they have gave the time to -- up to 1 year also, 8, 9 months also is available. But digital will remain. I can conclude this. We are not going to stop the digital. Digital is the future of the banking industry.

[Ashok Ajmera, analyst]

And ECL impact have been assessed...

[Prakhar Agarwal, analyst]

I'm sorry to interrupt, Mr. Ashok sir. The next question is from the line of Nitin Aggarwal from Motilal Oswal.

[Nitin Aggarwal, analyst]

Congrats on a very good quarter. Yes, sir, I have two questions. One is on the OpEx, like if I look at the OpEx number this quarter, that still looks a tad higher, especially the other OpEx. So was there any one-off in this? And how should we see the run rate going ahead?

[Atul Goel, executive]

One-off, there were definitely a one-off because we have incurred INR 558 crores for purchase of PFCL. That is the only -- on account of this, this number has increased. Otherwise, this number will be normalized in this time in the subsequent quarter also.

[Nitin Aggarwal, analyst]

Okay. So this is a nonrecurring expenditure?

[Atul Goel, executive]

It is nonrecurring because we have already, whatever the requirement would be whole of the year. We have already incurred INR 558 crores. There is one time.

[Nitin Aggarwal, analyst]

Okay. Okay. Got it, sir. And sir, secondly, on -- while you have like realigned the credit cost guidance and -- but that will directly feed into RoA or you will want to keep the RoA guidance unchanged at 1% by '25.

[Atul Goel, executive]

Nitin, you are very smart. I have given the guidance of 0.8% at the beginning and I have kept the credit cost only 1%. And if you see the first quarter result also, it is around 0.82%. So definitely -- there will be definitely impact of the RoA, but I'm not revising the RoA guidance, 0.8%, only I'm giving once guidance because I have given last time guidance, 1% RoA will be exit of the current financial year, '24, '25. So I think we will be in a position to achieve this 1% RoA before the exit of the current financial year. This [indiscernible] but the guidance remaining at 0.8%.

[Nitin Aggarwal, analyst]

Okay. Okay, sure. And sir, the other thing is on the tax rate because that is something that will really drive up the RoA beyond 1%. So by when can we expect the PNB's tax rate to come down to 25%?

[Atul Goel, executive]

Can you repeat what you told, more than 1%?

[Nitin Aggarwal, analyst]

Yes, the tax rate because tax rate is still around 38%, so by can we expect this normalize and come down?

[Atul Goel, executive]

As on date, we are on the old regime. We are under discussion with our tax consultant because last time also, I would say, we have some benefit. If we will switch over to the new -- so immediately, we will lose whatever the benefit there. But definitely, we have to take a call. I fully agree with you. The moment we will shift to the new tax method immediately, the RoA will be more than 1%.

[Prakhar Agarwal, analyst]

The next question is from the line of Rakesh Kumar from B&K Securities.

[Rakesh Kumar, analyst]

Sir, a couple of questions, sir. Firstly, sir, the PSL, like I saw the, like, previous quarter also this quarter also. So we are actually fulfilling -- meeting all the targets, especially in the small and marginal farmer also. So what was the need to purchase PSLC, sir?

[Atul Goel, executive]

There is a target for the 40% for the priority sector, 18% for the agriculture out of the subsector agriculture 10% is for the marginal and the small farmer. So we had to not only achieve the agriculture, subsector also. This is the reason we're purchasing this PSL from the market because we are short of the target.

[Rakesh Kumar, analyst]

Number is including the purchase, correct, no sir?

[Atul Goel, executive]

Number definitely that number. It will not come in the balance sheet in the form of the advance. It is only for the calculation for the priority sector. Whatever the presentation we have given, this amount has already been included.

[Rakesh Kumar, analyst]

There is a slight volatility in the recovery on return of numbers, sir, on a year-on-year basis. Now it is approximately INR 800 crores. So what is the full year target only on the recovery on written-off number, sir?

[Atul Goel, executive]

Rakesh, total target we have given for the INR 18,000 crores. Today, I'm having [indiscernible] INR 19,000 crores, I have more than INR 50,000 crore we're at this gross NPA. I think it is difficult. It is difficult to estimate whatever the recovery will come from this TWO but total recovery, we are confident whatever the number we have INR 18,000 crores, definitely, we will be in a position to achieve.

[Rakesh Kumar, analyst]

The question is on which book, like AFS, HFT, which book we have the depreciation sir [indiscernible].

[Atul Goel, executive]

Yes, there is some disturbance in the -- disturbance of the voice. Can you repeat the question? Too much disturbance is there, Rakesh.

[Rakesh Kumar, analyst]

Yes, sir. No, sir, I was asking, sir, this INR 390 crores of investment depreciation through which category this has come from, like this should not be from AFS. So I just wanted to know this INR 390 crore number.

[Atul Goel, executive]

This is all the account would be one of the subsidiaries. This is one of the -- because as per the revised guidelines, you have to revalue your subsidiary, et cetera, also. So this is our -- one of the subsidiaries, which -- where there is accumulated loss is also there. The valuation we have to take it from the market, INR 399 crores we have provided.

[Rakesh Kumar, analyst]

Sir, which subsidiary, sir, be, sorry, sir? I missed it, sir.

[Atul Goel, executive]

Subsidiary, I think it is not advisable to disclose the name of the subsidiary as such. It is only for 1 subsidiary. This I can tell you, yes.

[Rakesh Kumar, analyst]

Okay. And sir, this full processing NPA is around -- like though it has come down, but it is still very elevated food processing gross NPA. So, can you elaborate, please, sir?

[Atul Goel, executive]

You're talking about the gross NPA, na?

[Rakesh Kumar, analyst]

Gross NPA and food processing?

[Atul Goel, executive]

Food processing and gross NPA. If you see my -- this [ 4.98% ] it is the total gross number, but the number is -- it is a legacy because some of the rice seller, et cetera, I will give you -- as I told you, new acquisition is not -- it is only on account of the legacy issue from rice seller, food processing -- which is coming under the food processing.

[Prakhar Agarwal, analyst]

I'm sorry to interrupt, sir, Mr. Rakesh, could you please fall back in the question queue for further questions.

The next question is from the line of Jai Mundhra from ICIC Securities.

[Jai Prakash Mundhra, analyst]

Sir, excellent quarter and excellent steady performance on asset quality. Sir, I wanted to check in the opening remarks did you mention that SMA 0 plus 1 plus 2 at the entire bank level was around INR 1 lakh crores. I mean, all ticket size included what was the number?

[Atul Goel, executive]

Yes, you are very much right. It is INR 1,01,883 crore. But INR 5 crores and above, it is INR 1,604 only SMA2. Yes.

[Jai Prakash Mundhra, analyst]

Correct. So sir, if you were to bifurcate this into SMA 0 because that should be least risky and then...

[Atul Goel, executive]

I will give you. I've understood your question. Out of this INR 1,01,000 crores, INR 77,952 crores in the SMA 0. And I will give you the number of the SMA 0 today also, it is only INR 22 344 crores, INR 50,000 [Foreign Language]

[Jai Prakash Mundhra, analyst]

Right. And 1 and 2, sir also.

[Atul Goel, executive]

SMA 1 is INR 11,432 crores and SMA 2 is INR 12,499 crores.

[Jai Prakash Mundhra, analyst]

Okay. Sir. So sir SMA2.

[Atul Goel, executive]

[indiscernible] number is okay, because there is some of the borrowers who are making the payment vary last day. Yes, please go ahead.

[Jai Prakash Mundhra, analyst]

So I wanted to check, sir, SMA 1 and 2 number, has it increased? Or this is kind of a number is steady because the slippages run rate is very, very low, [ INR 1,750 crores ]. So given this SMA book, should the current run rate sustain or you think slippages can go up from here?

[Atul Goel, executive]

[Foreign Language]. It will not increase. I'm promising you. See last 4, 5 quarters, my slippage is around on the same number. If you see this number, it was INR 1,700 crores, INR 1,800 crores, only INR 2,000 was the number in the March quarter. And I'm just seeing the SMA 1, 2 if only compared with the March '24, even June '23. It is on the same line. It is only -- it has not decreased. It has increased same line.

[Jai Prakash Mundhra, analyst]

Okay. Sir, maybe I'll take this offline this number. The performance on asset quality is exceptionally good, even though this SMA 0 plus 1 plus 2 is still an elevated number.

[Atul Goel, executive]

No, no, no. I may correct you also. Elevated only 0. SMA 1 and SMA 2, only less than INR 25,000 crores. If you are adding the book of the INR 10 trillion, INR 25,000 crores borrower will be they are making the payment on the very last day, 55 to 60 days. This is the reason I'm giving more than INR 5 crores SMA2 number where there may be a danger for the -- especially be from the SMA 2 to 1, there is hardly INR 1,604 crores, Even, this slippage of the INR 1,755 crores if I take highest 10 number also, the highest #1 is 89, if this is only INR 7 crore.

[Jai Prakash Mundhra, analyst]

Right, no already said in your opening remarks. So that is very, very satisfactory. Sir, secondly, in your opening remarks, you mentioned that there will be a time when slippages are lower and then the recovery remains strong. So you would have a reversal of provision, but would you think that, that may be the time to increase the buffer on ECL? Any thought process on contingent provisions to prepare the bank for ECL transition.

[Atul Goel, executive]

You are very much active. We will think because 95%, 96% is already the PCR. So there is no room available to add something there. So, I mean, recovery is sometimes 2x, 3x also. Because ECL maybe last time also I explained. What is the ECL? ECL is the how your new underwriting. I have just given the data of the new underwriting where this NPA percentage is 0.3%. So as I said, I'm also not thinking there will be too much of requirement of the ECL also, but definitely if there is too much of the recoveries available provisions, we will not mind. We want to give the extent of the balance.

This is the result of the strength of the balance sheet in the last year or the last to last year also. Now we are getting whatever you are saying, I fully agree. If situation, we will not mind to allocate some of the account of the ECL provision if there is a requirement.

[Jai Prakash Mundhra, analyst]

No, sir, have you done any calculation on ECL as to what could be the rough?

[Atul Goel, executive]

Yet, we have not done.

[Jai Prakash Mundhra, analyst]

Okay. And sir, lastly, this recovery this quarter and for the full year of INR 18,000 crores. If you can highlight, sir, how much is retail and how much is corporate? Or these are all small ticket or you are envisaging some large ticket corporate [indiscernible] also.

[Atul Goel, executive]

It will be a mix of everything because NCLT given the number of around INR 3,000 crore pillar. So that may be from the large account basically. That will be large from the -- but it is very difficult to identify which sector, but major NCLT you can account entire few thousands will be in the corporate because we are having the big junk of the small account also of the less than 10, less than INR 1 crores. So it will be a mix of each segment.

[Jai Prakash Mundhra, analyst]

Right So INR 2,000 from corporate and rest maybe INR 15,000 crore from...

[Atul Goel, executive]

No, no, no. 3,000, 3,000 only from the NCLT. NCLT, 1'm just seeing, NCLT will be normally is the corporate and this will be the mix of the each and everything. Recovery from the '24, '25, for quarter 1 that is -- you want for quarter 1 or the whole of the year?

[Jai Prakash Mundhra, analyst]

No, no, for full year, sir.

[Atul Goel, executive]

Just let me -- for whole of the year, INR 18,000 crores. Whole of the year, I told you INR 3,000 will be NCLT. For that INR 3,000 you can apportion for the, particularly for the corporate. I can give the breakup of the recovery of this current quarter also. So if I see it is retail around INR 449 crores, agri around INR 716 crores, MSME, around INR 900 crores, others will be [ INR 1,150 crores ].

So same proportion, I can think. So then, if you can bifurcate this INR 3,249 crores, it will remain in the same proportion. Some recovery will come from the MSME, remaining from the corporate.

[Prakhar Agarwal, analyst]

Could you please fall back in the question queue for further question.

[Operator Instructions] The next question is from the line of [ Ankit Bansal ] from AB India.

[Ankit Bansal, analyst]

Congratulations for the greatest set of numbers in the history of PNB. This is what we want to see PNB. Very, very congratulations, sir. Very, very congratulations. Number one, we want to see PNB above State Bank of India. Very good numbers, sir.

Sir, my question is, sir, how are you seeing the business environment? In which sectors are you disbursing more loans. Economy side, how is your perspective, is the business growing, are SMEs comfortable in taking loans? What are the sectors your view, sir?

[Atul Goel, executive]

Ankit, our focus is on the RAM. In last call, also I told, if we want to increase this number from 54% to 60%, and there is an increase also, it is more than 55%. So focus will be on the retail, RAM, agri and the MSME because there is a good demand in this sector, not only in the metro, not only in the semi-urban, even I can tell you, there is a good demand in the rural sector also. So there is an opportunity available to the bank to target this segment and we are having 10,000 branches, most of the branches in the rural, this is one area.

As far as the other areas regarding corporate is concerned, so there is a good demand in the infra also. Even in the budget also INR 11.11 lakh crores, they have put up in the infrastructure CapEx. And so there is a good demand in the road and we are also providing -- considering who is the best customer. So road there is a demand. Cement there is some demand. Some of the corporate borrowers they're coming for the expense and even steel also. And also, there is a demand in the NBFC, but NBFC we are very cherry-picking. We are very choosy also. If you see my exposure to the NBFC, the 99% in the A and above and AA and above, 98%. So demand is coming from this sector and the focus area is the RAM.

[Ankit Bansal, analyst]

Sir, green energy, sir, how is that going?

[Atul Goel, executive]

Can you repeat, Ankit? Ankit please.

[Ankit Bansal, analyst]

Green energy sector, sir. Green sector.

[Atul Goel, executive]

Green energy, definitely. Green energy, we have the Board-approved policy. We have opened separate department under the risk management department, and we will also -- so they're also doing this solar where we are getting the opportunity we are financing.

[Ankit Bansal, analyst]

Okay. Okay. But sir, this is all for me. And I'm proud now to be a PNB shareholder, sir.

[Prakhar Agarwal, analyst]

The next question is from the line of Yash from Citi Group.

[Unknown Analyst]

Wanted to check on the for agri gold, if you can give.

And also second, anything unusual on the slippages because it was significantly lower than the 1Q [indiscernible] which we have seen as well in the past. And also agri slippages have been quite low given the usual run rate which you guided in the last quarter for $7 billion to $8 billion.

[Atul Goel, executive]

Gold, you're asking about the gold. The gold outstanding is INR 7,767 crores in the agriculture, retail is INR 720 crores. The total outstanding is around INR 8,500 crores.

[Unknown Analyst]

And on the slippages, sir, if you can.

[Atul Goel, executive]

Slippage is around INR 7 crores, yes.

[Unknown Analyst]

No sir. I just wanted to check on it.

[Atul Goel, executive]

It also will recover.

[Unknown Analyst]

And sir, on the corporate recoveries, how do you see the corporate recovery moving from here?

[Atul Goel, executive]

Corporate recovery for this particular last quarter, June quarter?

[Unknown Analyst]

Yes. And how would that impact the overall recoveries?

[Atul Goel, executive]

I could not understand your question. Can you repeat the question? What do you want?

[Unknown Analyst]

So for 1Q, what was the corporate recoveries and in coming quarters, how would be the impact?

[Atul Goel, executive]

Okay. Okay. Okay. See, recovery, as I told you, out of the INR 3,249 crores, basically, corporate recovery is around INR 1,159 crores maybe some part of the MSME [ INR 926 crores ] that is also coming in the corporate also some part. So this is the -- and as I told you earlier also, recovery will come probably all the segment also. The INR 3,000 crore number we are expecting from the NCLT. There is so many other accounts which are coming in the category of the corporate, there also recovery is coming through the [ OTAs ], other mode, et cetera. So recovery will -- because if you see that around 25%, you can easily assume will come from the corporate remaining from the agri and the retail and the MSME.

[Prakhar Agarwal, analyst]

The next question is from the line of Ashlesh Sonje from Kotak Securities.

[Ashlesh Sonje, analyst]

Congratulations on the result. A couple of questions from my side. Firstly, on the -- you have given out the NPA ratio in the preapproved personal loan portfolio, which was at 1.86%. Can you also share what was the NPA ratio as on March '24 and a few quarters before that as well?

[Atul Goel, executive]

March '24 in this PAPL, it was around 1.5 to -- between 1.5 to 1.6. I don't have [indiscernible] but it was in the -- between the [ 1.5 to 1.6 ]. There is no much increase, yes, because I'm monitoring this number every fortnightly.

[Ashlesh Sonje, analyst]

Okay. Got it, sir. And secondly, what would be the reclassification of income, which you would have done between the interest income line and noninterest income line because of the P&L charge related regulation from RBI?

[Atul Goel, executive]

That is not implemented as on date.

[Ashlesh Sonje, analyst]

Okay. Sir, because a few other banks have indicated that it has come into force starting 1st of April.

[Atul Goel, executive]

Okay. Okay. Okay. I'm not aware exact amount. We will give the answer of your query. Yes, that is -- you're right, it was applicable from the 1st of April, yes.

[Ashlesh Sonje, analyst]

Okay, sure. Sir, and lastly, on the capital raise front you have indicated...

[Prakhar Agarwal, analyst]

Could you please fall back in the queue.

[Atul Goel, executive]

I can give the answer. I've got the number also. Around INR 13 crores, we have booked in the P&L interest shifted to the P&L charges in the fees and other income.

[Prakhar Agarwal, analyst]

Thank you. The next question is from the line of Bhavik Shah from Morgan Stanley.

[Bhavik Shah, analyst]

Congrats on good set of numbers. Sir, just 2 questions. So we mentioned that SMA 1 and SMA2 is INR 23, 000 crores. I just wanted to understand how is it broken up between retail, agri, MSME and corporate?

[Atul Goel, executive]

Bhavik, your voice was breaking, you're asking for the slippage?

[Bhavik Shah, analyst]

No, sir, I'm asking for the breakup of SMA1 and 2, which is INR 23,000 crores.

[Atul Goel, executive]

SMA -- breakup of the SMA 1 and 2, I have the consolidated number as on date regarding -- just a minute I will give you the number also. You want the SMA2 number or yes, individually SMA because it will be -- it will take time. I can give you the SMA 0, in the retail is around INR 20,000 crores. The SMA1 6,000 crores retail, SMA2 around INR 6,000 crores.

agri, SMA 0 is INR 16,000 crores, SMA 1 around INR 800 crores, then SMA 2 is around INR 900 crores. As far as MSME is concerned, SMA 0 is around INR 800 crores, then INR 4,000 crore plus in the SMA 1 and 5,000 plus is the SMA 2. Others with corporate then INR 22,000 crore in the SMA 0, INR 110 crores in SMA 1 and INR 290 crores SMA 2.

[Bhavik Shah, analyst]

So very clear, sir. And sir, the preapproved personal loans, sir, can you share some light on what is the ticket size and what kind of borrowers are these?

[Atul Goel, executive]

[Foreign Language] there is 2 types of PAPL, one digital mode, digital mode this -- the maximum eligibility is around INR 10 lakhs, so average ticket size if we see, it is around sometime between the INR 2 to INR 3 lakh. So as far as other is concerned, other than digital, there is also around INR 10 lakh we are giving. If you -- around the between the INR 4 lakhs to INR 5 lakhs will be the maximum amount, yes.

[Bhavik Shah, analyst]

Okay sir. And sir, do we have the last quarter number for SMA also. So you had given a very detailed breakup. If you can share the last quarter number, it will be very helpful.

[Atul Goel, executive]

Okay. Okay. We will give you no problem. Okay. We will give you.

[Prakhar Agarwal, analyst]

The next question is from the line of Rakesh Kumar from B&K Securities.

[Rakesh Kumar, analyst]

So the CET-I would have increased because market risk rate and including crop. So if you can -- if you can tell the CET-I, sir, as on June with these 2 numbers?

[Atul Goel, executive]

CET-I you're asking the June '23 number?

[Rakesh Kumar, analyst]

June '24 sir.

[Atul Goel, executive]

June '24 number, CET-I is INR 82,383 crores.

[Rakesh Kumar, analyst]

Okay. This is including PAT and the impact of the market risk also?

[Atul Goel, executive]

Let me clarify. Let me clarify you. For the calculation of the capital adequacy ratio, quarterly profit is not added. If notionally, we will add our CI will be more than 40 basis points above because 1,000 around 13 basis points, it is increasing. So PAT is not included in the CET-I for computation of this capital efficacy ratio, only this revaluation reserve, which I told you INR 373 crores, net of tax was added for the CET-I.

[Rakesh Kumar, analyst]

Okay. And sir, just last question, sir, with respect to this credit growth in the fixed loan segment and [ TBL ] related segment. So we have given bifurcation of loans based on lending rates, so where the growth is coming in the fixed rate and TBL-related loans, sir?

[Atul Goel, executive]

Fees rate normally the fee rate 10% is coming from the agricultural. So you may be aware the loan up to INR 3 lakh rupees, there is fees only 7% basically, the major portion is from the agriculture side.

[Rakesh Kumar, analyst]

And TBL, sir?

[Atul Goel, executive]

[ TBL ] naturally this product we are using for the loan less than 1 year. Suppose the -- somebody is having the CC limit that 60% has to be kept in the [indiscernible] so they're asking for the [indiscernible] et cetera. So TBL for that. It is less than 1 year.

[Prakhar Agarwal, analyst]

Thank you. Ladies and gentlemen, due to time constraint, that was the last question for today's conference call. I would now like to hand the conference over to the management for their closing comments.

[Atul Goel, executive]

Thank you very much. I want to thank each and every who have attended this conference. And I want to place on the record continuous support from all of you because on account of your continued support, we are able to perform better and better also. And you're encouraging us to do further better. Persona is, you should be better than the [indiscernible] that definitely we will keep in the mind also. And somebody has told, this is the best quarter. [Foreign Language].

With this one, once again, I thank you all of you, and I hope whatever the support we are getting from all of you, it will remain continue. Thank you. Thank you very much.

[Prakhar Agarwal, analyst]

Thank you. On behalf of Elara Securities Private Limited, that concludes the conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.

[Atul Goel, executive]

Thank you.