Punjab National Bank

NSE:PNB

Earnings Call Analysis

Performance Growth Amidst Challenges

In the recent earnings call, the company detailed their accomplishments in adversity. Despite maintaining a net interest margin (NIM) guidance of 2.5% to 3%, they overachieved this quarter with 3.11%, ascribing the success to their robust team and support from the board and government. Advances have surged by 13.4%, with retail, agriculture, and MSME sectors seeing substantial growth. With a focus on digital and HR transformation, substantial efforts in business expansion have resulted in sanctioned loans of INR 6.68 lakh crores, and a strong capital adequacy ratio sits at 15%. The bank is eyeing a reduction in credit costs and an increase in the recovery of non-performing assets (NPAs), flaunting a yearly recovery target of INR 22,000 crores and an achieved INR 11,000 crores to date. The bank anticipates improving their return on equity (ROE), currently at 0.46%, to 1% by the end of fiscal year '24-'25.

Punjab National Bank Sets its Highest Quarterly Records Post-Amalgamation

Punjab National Bank (PNB) has delivered an exceptional set of results for the quarter ended September 2023, marking the highest figures in net interest income, operating profit, and net profit over the previous 14 quarters since its amalgamation. The bank's gross business has seen an 11.26% year-over-year increase from INR 20.26 lakh crore to INR 22.51 lakh crore.

Substantial Growth in Deposits and Advances Signals Strong Momentum

Key highlights reflect robust growth in deposits by approximately 9.7%, reaching INR 13.9 lakh crore, and a surge in advances by 13.43% to INR 9.4 lakh crore. Savings swelled by 4.32%, an aspect critical to PNB's value proposition, supported by its extensive branch network and customer base.

Impressive Profitability and Reduction in Non-Performing Assets (NPAs)

PNB reported a soaring net interest income of INR 9,923 crore, a near 20% increase year-over-year. Operating profit followed suit with an 11.67% rise to INR 6,216 crore. The net profit skyrocketed by over 327% to INR 1,756 crore compared to the same quarter last year. Concomitantly, gross and net NPAs showed significant reductions to INR 65,000 crore and INR 13,000 crore, respectively.

Provisioning and Slippages Indicate Caution and Resilience

PNB has fortified its stance by pushing its provision coverage ratio (PCR) past 91%, suggesting lower provisioning needs in future quarters. Slippages diminished to INR 1,826 crore, which is much lower compared to the year prior, and recoveries surpassed the slippages, showcasing the bank's effective risk management strategies.

Guidance Suggests NIM Pressure Though Stability Expected in NII

Despite an uplift in net interest margin (NIM) to 3.11%, the bank maintains a conservative guidance of 2.5% to 3% in anticipation of interest rate cycles impacting deposit repricing. Meanwhile, PNB is confident that the net interest income (NII) will remain buoyant or see growth in the coming periods.

Strong Capital Position and Approval to Raise Additional Capital

PNB's capital adequacy ratios reflect a strong capital buffer, with the common equity tier 1 (CET1) at 10.23% and total capital adequacy at approximately 15.9%. The bank has board approval to raise an additional INR 12,000 crore to fortify its financial position further.

Digital Transformation Initiatives and Operational Excellence

The management emphasized the bank's initiatives toward digital transformation and improving operational metrics, which have not only resulted in enhanced service channels but can also be seen in the new acquisition numbers and low NPAs in new disbursements.

Earnings Call Transcript 2024-Q2

[Deepak Singh, executive]

Good day to all. I am Deepak Singh, looking after the Investor Relations. Welcoming you to the Punjab National Bank's earnings conference call for the period ended September 30, 2023. The bank is represented by Managing Director and CEO, [indiscernible] Kumar Goel; Executive Director, Sri Kalyan Kumar; Siri Binut Kumar; and Sri [indiscernible]; and other [indiscernible] members of the top management.

The structure of the con calls include an opening statement by MD and CEO sir, and then the floor will be open for interaction.

Before getting into the con call, I will read out usual disclaimer statement. I would like to submit that sets given her in are not guarantees of future performance and undue reliance should not be placed on them. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or results explained or implied by it is forward-looking statements. Investors are, therefore, requested to check the information independently before making any investment or other decisions.

Over to MD and CEO, sir.

[Atul Goel, executive]

Good after noon, every body. Rakesh, you have to go give the opening remarks or should I start immediately?

[Rakesh Kumar, analyst]

No, sir, I think we can start, sir. So [indiscernible].

[Atul Goel, executive]

Thank you, Mr, Deepak. Thank you, Rakesh, Jee. Good afternoon to everybody, rather good evening. I welcome all the analysts and the investors in this con call, which we are having for the quarter 2 result of the financial year '22, '23, quarterly as well as the half yearly results. So I will give my brief opening remarks and the floor will be open for the question of any analyst as well as the investor if they want to ask any questions.

So this is one of the very wonderful quarter for the -- as far as the Punjab National Bank is concerned. The 3 parameter, which is really, you will be very concerned regarding the net interest income, whether it is the operating profit, whether it is the net profit, these 3 numbers, which we have shown in the current quarter, September 2023, it is the highest we have achieved first time in the last 14 quarters after the amalgamation. So as far as business is concerned, there is the growth of the gross business is around 11.26%. Last year, this business was INR [ 20.26 ] lakh crore, which has reached INR 22.51 lakh crore.

The composition of the gross business, there is a growth of around 9.7% in the deposit. Deposit used to be around INR 11.93 lakh crore in September 2022, increased to INR 13.9 lakh crore. Similarly the growth [indiscernible], there is growth of the -- robust growth of 13.43%, which used to be around INR 6.30 lakh crore in September 2022, increased to INR 9.4 lakh crore. Similarly, there is a growth of around more than 4%, 4.32% in the savings, which is our main USP of the Punjab National Bank because we are having 10,000 branches, 18 crore customer. And the car size also, there is an increase of around 2.36% and the RAM, which is the focus area of the bank, there is a growth of around 13.41%. And if you see the percentage of the RAM to the total credit, it has also improved 55.63%. If we would see the -- in September 2022, this ratio was 53.45%. Even in the June '23 quarter, this ratio was improved 54.74%, further it has improved to 55.63%.

As far as the profitability number is concerned, net interest income, which I just told you, it has improved by 20%, around 20%. It was INR 8,271 crore, which has increased to INR 9,923 crore, and it was INR 9,504 crore in the June 2023. So there is a Y-o-Y growth of around 19.98%. There is a quarter-to-quarter growth also.

The operating profit, which was -- which used to be around INR 5,567 crores has increased to more than INR 6,000 crore and stood at INR 6,216 crore, and there is a growth of around the 11.67% Y-o-Y. And this number was INR 5,968 crore in the June 2023.

Net profit, which was INR 411 crores in the September quarter 2022 has increased to INR 1,756 crore, with a growth of around 327.35%, and this number was around INR 1,255 crores in the June 2023. So there is a Y-o-Y growth of more than 300%. There is a quarter-to-quarter growth also. Main important is the -- which are the major concern of all the investors and the analysts also, gross NPA and the net NPA number.

So there substantial reduction in the gross NPA as well as the net NPA quarter-to-quarter or Y-o-Y also. The gross NPA number, which used to be around INR 87,000 crore in September '23 has reduced to INR 65,000 crore in December 2023. Similarly, the gross NPA in terms of the percentage, which used to be around 10.48% in September '22, 7.73% in June '23, reduced to 6.96% by September 2023.

Similarly, the net NPA number, which used to be around INR 29,000 crore, has reduced to around INR 13,000 crores. And this number was around INR 17,000 crore in the June '23. And the gross NPA number, which used to be around 3.8% has reduced to 1.47% in the current quarter, current quarter means September 2023.

ECL last time, we have told PCL should be more than 90%, it was 89.83% in June and 83.96% in September '23. Now the PCR of the bank is 91.91%. On account of this PCR, I am telling you deduction than the requirement of the AG provision in the quarters to come has reduced drastically. Because as of it, I'm shipping only INR 13,000 crores generated [indiscernible] number. I'm having the INR 6,000 crores more than operating profit. If we make the INR 13,000 crores provision, our net NPA will become the zero in times to come also. So because -- now there is no worry, because there is a -- PCR has increased to 91% as far as the movement of the NPA is concerned. So there is a substantial reduction in the slippage also.

Slippage [indiscernible] INR 1,826 crore in the quarter endd September 2023. This number used to be around INR 6,000 crore in September '22 and the last quarter it was INR 2,390 crores. Last time, in '22, '23 our motto was recovery should be more than the slippage. We have achieved that motto. And this year, we have the motto, our slippage should be half of recovery should be double than the slippage. So if you see INR 1,820 crore slippage, but recovery for the current quarter is INR 5,500 crore.

So whatever we have told, we have already achieved and the -- as far as this credit this credit cost is also concerned on the NPA. Credit cost, last time I told you, it should be around between 1.5 to 1.75. But last quarter, because [indiscernible] INR 4,374 crores was the requirement, it was around 1.98%. But the current quarter, the provision for the NPA has reduced drastically on account of the increased PCR in the last quarter as well as the current quarter, INR 3,018 crore, which is coming 1.31 for the September quarter. And half yearly also, it is around 1.67%. So whatever we are thinking it should be remaining within the 1.5 to 1.6.

Easily we will be in a position to achieve because in the quarters to come, on account of the increase for the provision coverage ration, I'm not thinking there will be much requirement of the NPA provision. As far as cost of deposit is concerned, it was 4.71% in the June quarter. It increased to 4.84% because the -- some of these deposit has not been repriced earlier also.

Last also I told still there will be some of the deposits, which has not been repriced as on date, September '23. Around 15% of my deposit still has to be repriced because some of the term deposit, which they have purchased by us, it has to be renewed at the time of the maturity in the amount -- ballpark number is around INR 1 lakh crore, so that has to be the repriced. This is the reason the NIM even we have got the 3.11% for the current quarter as against our guidance for the 2.90% to 3%, but still, we are maintaining our guidance of 2.5% to 3% because some of the price -- deposit has to repriced.

Also, we are assuring all of you, even I am confident whatever the NII in the afloat number, I think we will be in a portion to maintain the NII in the afloat number or there will be a growth. But NIM in terms of the percentage [indiscernible] go down. As far as [indiscernible] advance is concerned, it was 8.13% in June, now quarter, it has improved to 8.23% as well as the NIM, as I have already told -- movement I have already told.

As far as for the information to all the analytics as well as the investors. What we have done because the -- up to last year -- last quarter, we are providing around INR 280 crores or INR 283 regarding the wage revision. So now we have increased the percentage and this quarter, we have provided this year INR 694 crores, taking the impact from the November 2022.

This is another thing as far as the slippage of the INR [ 1,826 ] is concerned. The breakup of the slippage is the -- it is agri around INR 424 crores. MSME INR 683 crores, [ ATI ] INR 420 crores and other INR 223 crores and existing MP INR 76 crore. It means that there is a well diversified. It is not the particular segment in retail, agri. There is an equal balance in the -- whatever the slippage is being coming in the -- as far as the increase in the advances is concerned, as I told you, 13.4 is the growth advance and the retailment there was a 40 -- more than 40% increase in the retail, agri 4.49, MSME 6.48. RAM, if you see the 18.21%.

So this is the -- and 1 more thing I would like to give you, last quarter I have also given the data, how we have taken a lot of initiative for the digital transformation. We have taken a lot of the initiative for the HR transform, which is not reflecting in the balance sheet, but they are reflecting in the number. Last quarter also I've given the new acquisition from the 1st of the July 2022, till date. It means 36 plus 3, 39-month data for the new acquisition. Last 3 month, we have sanctioned INR 6.68 lakh crore, INR 6.68 lakh crore we have sectioned, INR 5.97 lakh crores we have dispersed, outstanding in the new acquisition is INR 4.63 lakh crore.

Out of this INR 4.63 lakh crore would be NPA is hardly on INR [ 1,314, ] which is coming around 0.22% of the total advances for new acquisition.

I will give further this segment-wise distribution also. Agri, the NPA is INR 197 crores, 0.23%. Retail, it is 204.18%. MSME, it is around INR 882 crores, which is coming around 1.4% of the outstanding. And others, others means corporate. There is a hardly INR 31 crores slippage, which is coming 0.00. It is difficult to calculate in the percentage terms also.

This is the initiative taken. This is the result of the innative taken by the bank for how to improve the underwriting standard, how to improve the collection efficiency. This is the reason our slippage has reduced drastically and improvement of the recovery also happen.

The -- rather than the capital adequacy ratio is concerned, the capital adequacy ratio 10.23 is the CET1, [ 81.1.79 ] as against the norm of the 8 for CET1 and 9.5 for the Tier 1, Tier 1 is at 12%. Total CET is around 15.9%. And we have got the approval of the Board for raising INR 12,000 crore in the current financial year. Out of this INR 12,000 crore, INR 7,000 crore is [ 81 ] and remaining INR 5,000 crore for the Tire 2, out of which we have already raised the INR 3,090 crores in first quarter of the [indiscernible] Tire 2. And [ 81 ] we have also raised in the last quarter, last quarter means September quarter of the INR 30,000 crores.

So immediately, there is no much requirement of the capital. We are well capitalized at 15%. As far as the NCLT is concerned recovery from the NCLT, the first quarter recovery was INR 566 crore. The second quarter, it was INR 556 crore, and we are hopeful current quarter will be good for the recovery from the NCLT because some of the account is in the lined up. So around INR 2,500 crores, we are expecting the recoveries should come in third quarter, but sometimes we don't know because it is a legal process and the fourth quarter, we are thinking will be more than INR 1,089 crores.

One more thing I would like to tell to all the analysts and the investor also OTR-1 and OTR1. OTR1, the outstanding is [ 327 ] and the OTR2 is the out outstanding INR [ 7,108 ] , that is standard account.

As for the regulatory guide, there is a requirement of the 1% provision we have to make and 5%, we have to make the provision for the MSME. But considering these would be some of the account, maybe it does in time to come because of the moratorium of the account is going to be over also. [indiscernible] of the 10%, we have made it 12.5% provision in all -- the account, which are in the standard category in the OTR1 and OTR2. On account of this INR 267 crores we have made additional provision on this account. And apart from this INR 308 crores, we have made a program of the June 2019 circular because as per the circular, this resolution is not being done in the account, you have to make the provision 20% first, then after this, you have increase the 35%.

So this is my initial remarks about. And I think I am presenting the [ 7 ] results after taking the charge of the PNB. I think this is best result in my opinion I have presented in this quarter of September. This is the -- on account of the great effort of my team, PNB 1 lakh employee we are having. They are working day and night for the increase of the business, whether it is a CASA, whether it is the [indiscernible] advances, whether it is a recovery, whether it is a [indiscernible] the slippage, they are working day and night and the transformation, as I told you, that is under way. After that, I think we will be in a portion to -- so the better result and there is a support of the -- our Board member also, support of the government, apart of the regulator. So with this my initial remarks, now I'm open for any questions if you want to answer. So thank you, thank you very much.

[Rakesh Kumar, analyst]

Thanks a lot, sir. Quite elaborate description of the result. And really, it's a very strong set of numbers that PNB has reported. Now we're going to start the Q&A session. I will request Mr. Ajmera to go ahead with the questions.

[Ashok Ajmera, analyst]

Congratulations to you, sir, and the entire team. Definitely, one of the -- I mean the best quarter as regards the profitability is concerned, whether it is the operating profit or the net profit, maybe in the last 3, 3.5 years time. And the bank is really doing well and trying to reach its glorious heights.

So after you have such an elaborate detailed introductory address on the results, I would ask my first question on the ROE that the ROA of our bank is still, in spite of the best performance and [indiscernible] 0.45 as compared to the many of the peer banks, which are now started going beyond 1, 1.2, 1.34 per quarter, I mean, if you look at the quarterly results. So this is 1. Of course, it is -- it has a lot of story behind it. So what now is the -- I would rather put it like whatever episode had happened, which had taken the bank down, I mean, is there any bearing of that if continuing on the operations or the plans of the bank or any regulatory sort of restrain or any testing or that happening is fully over and overcame by the bank?

[Atul Goel, executive]

Ajmera, jee, as far as your question is concerned, I may clarify to all. There is no issue. There is no struggle from the regulator side. There is no from the government side. There is no issue at all. Everybody is thinking how we can improve the working of the bank. And if you see the last year, the ROE was around 1.7%. If you see the current quarter, it is 0.46%.

We are also thinking how we will be in the provision to a 1% number. And I think within the exit of '24, '25, I think definitely, we will be in a position to achieve even the exit or the -- we will also try -- before the exit also. But -- so what was the issue really that is not the issue on account of the episode, which you are telling. There is no issue on the staff side also. Issue is the because on account of the net [indiscernible] our NPA book is still on the very higher side. If you see the -- it is my goal by INR 20,000 crores, I am I mean technical [indiscernible] or INR 9,000, and INR 6,000 crore is the NPL. So if you add both around, 1.5 lakh crore [Foreign Language] is the NPA. Where I'm not earning anything.

If I will earn 8% or 7% out of this, then you can imagine what will be my operating profit. INR 9,000, crores, INR 10,000 crores will be [Foreign Language]. Last year, we have set a target of INR INR 32,000 crore. Against this, we have recovered INR 29 crore. This year, we have target of the recovery of the INR 22,000 crore, and INR 11,000 crore we have achieved in the first half. So we are only the track. Time will come definitely. We will be in a position to achieve the whatever the you are thinking [indiscernible]. So there is no issue from any side also. This I may confirm everybody is working whatever best they can do for the growth of the bank.

[Ashok Ajmera, analyst]

Sir, my second question is on, you have about 5 subsidiaries and 50 associated companies with you. Can you give a little color on the entire operations of these subsidies or associates? And how much they are adding to the bottom line of the bank in any way or any plans to monetize?

[Atul Goel, executive]

See, as far as plan is there, they monetize that is not a plan. I'm telling you because last time also I have explained, we were thinking to monetize the -- our investment in the [indiscernible] because we are already having the stake in the Met Life. Because [indiscernible] HSBC has come on account of the merger of the OBC. As per the regulatory guidelines, we were required to bring our holding less than 10%, which we're having 23%. The last time the -- although we have started to plan to [indiscernible] but in the meantime, [indiscernible] has already changed the regulation. In second insurance company, you can be as an investor category, not as a promoter category up to 25%. Since we were having 23% we have changed our plan to this investment is also.

As on date, as far as monetization is concerned, there is no monetization plan because my PNP housing Finance is doing wonderful. Last time also, we -- because as per the regulatory guidance, we have to bring our holding less than 30%. That we have already grown around 28.15%. There is no issue as on date also. And last time, whatever the shares, which was available to on account of the [indiscernible], we have renounced. We have made a good -- some money in the -- by selling the renowned also. PNB also in there is no issue. PNB investments there will be an card, we are now -- PNB card, we have already got the approval from the regulator also. The TSC model we are -- we will be implementing this were the source of the lead either from the liability side on the other. PNB [indiscernible] is also the all my subsidiary is working well also, all earning profit. There is no issue. I am thinking there is no challenge in the any subsidiary also and there is no plan as of date, Ajmera, jee.

[Ashok Ajmera, analyst]

Point well taken, sir. Sir, If you look at the ratings slide, Slide 13, I think this AAA has come down from 45.6% to 44%. AA has come down from 26.83% to 25.831%. And even A has come down from 16.3% -- A has a little bit gone up, but BBB has increased from 4.8% to 5.7%. So is it because of some payment by this AAA and AA companies repayment or something, or is it the downgrade of the rating of some of these companies? Because our conscious, I think, decision is to increase our quality of the book to AAA, AA or A. So were there any kind of analysis done on this in percentage...

[Atul Goel, executive]

Yes, yes. We had made full analysis of this also. If you see around 92.77% in the investment grade. And if you see the composition of also the, 43% in the AAA. There is no downgrade, not a single account because I have given you the data of the last 3 of the corporate also. There is only INR 31 crores NPA. There is no downgrade because the people is very rate sensitive. We are not giving the rate, which doesn't suit to us. That is the only reason because [indiscernible] has down. Otherwise, there is no issue. AA is also the same thing. If we are not matching the rate of over because you are at the increase in the 2.5%, more than 200% in the last 1 year. But the all this type of the AAA or AA, they want the less than my cost. That is the only reason.

Otherwise, there is no issue. [indiscernible] there is size of the INR 9 lakh crore, sir, INR 9 lakh crore advance, INR 9.40 lakh crore, 10,000 branches, INR 16,000 crores BBB [Foreign Language], then we are giving the loans to the MSME. [Foreign Language] major portion will be the MSME also. So normally, MSME, it is very difficult to get the rating more than BBB. INR 2,000 crore, you are thinking 4.89 to 5.71 because they are yielding the good [indiscernible] for the bank. Otherwise, even BBB also, we are very sensitive there should not be any credit risk. Rating may be BBB, but credit risk should not be there.

[Ashok Ajmera, analyst]

No, yes. sir, my last.

[Rakesh Kumar, analyst]

Ajmera, I will just request, other questions..

[Ashok Ajmera, analyst]

One more?

[Rakesh Kumar, analyst]

So there are other people waiting in the queue. So I'll request...

I will request Mahrukh to go ahead and ask the question.

[Mahrukh Adajania, analyst]

Congratulations. Sir, I had a couple of questions. Firstly, on credit costs, they have come down very well. So do we see them stabilizing here because most other banks have, have most of the PSUs are probably running slightly higher than this current level of yours. So do we see the credit cost stabilizing here or falling further?

And likewise, for slippage. So we saw in addition to existing accounts we saw around INR 19 billion of slippage, which is, of course, at a low, which we haven't seen for many, many years. So does it stabilize here now? Or will that be volatile over quarters?

[Atul Goel, executive]

Mahru, as far as credit cost is concerned, as I elevated in my opening remarks also, because we crossed 91%. On account of this 90% PCR, our aging requirement has reduced drastically. So whatever the credit cost, which was the INR [ 4,300 ] plus in the first quarter, has induced drastically, INR [ 3,000 ]. And I'm hopeful because there is no much slippage also. I think there will not be further increase in the credit cost because last time also we have given 1.5 to 1.75. But first quarter, it was 1.98. And I assured and promised to all of you it will be within the range of the 1.5 to 1.75.

If you see my half yearly credit cost, this is 1.75. I am hopeful it should further decrease because [Foreign Language]. If there is no recur -- 91% already I have made a provision, INR 13,000 crore my net NPA. INR 6,000 crores I'm sitting on the operating profit. So there is -- I think it should be further reduce slippage as we have told. INR 1,800 crore number, even we are hopeful and quite confident, quarter-by-quarter, this slippage would be reduced further. Because if you see my SMA, more than INR 5 crores, it is hardly INR 1,448, SMA-2 only, which used to be around INR 1,758 last.

There is no -- even the account is INR [ 1,448 ] we have already show, more than INR 5 crore, corporate only INR 14 crore is there. We are very confident. We have controlled our slippage. We have taken a lot of initiatives to increase the underwriting standard also and as well as the collection efficiently. I've already given the data, I'm not repeating new creation of the last 3 years. That will give you the core [Foreign Language].

[Mahrukh Adajania, analyst]

Got it, sir. Sir, just in terms of employee expenses, sir, what is the rate of hike now that you are assuming? You almost doubled it, right, double the provision?

[Atul Goel, executive]

[Foreign Language] I am the Chairman of the IAB also. What I'm telling you, I will give just answer of your question. Because last time, 15% settlement was done. We are providing 10%. We are providing 10% from the November '22 to June. We have thought, we don't know how we will be in a position to settle it. We have increased -- now I think I can assure you we have provided adequately.

[Mahrukh Adajania, analyst]

Okay. So you would have provided 12% or 15%, or you don't want to talk about?

[Atul Goel, executive]

I will tell you, we have provided adequately. Please try to understand. I have told you also. That will not be good if I will give the percentage.

[Mahrukh Adajania, analyst]

Got it, sir. And, sir, just 1 last clarification. You said that around [ INR 1 trillion ] of deposits are yet to reprice. What was -- there?

[Atul Goel, executive]

Yes. Around 15%, I'm having the total deposit of around INR 30 lakh -- sorry, 13 lakhs, out of which, around 7 lakh I am having the term deposit. 15% around. You can think around the INR 1 lakh crore still to be reprice.

[Rakesh Kumar, analyst]

I will request Anusha to go ahead with her questions.

[Unknown Analyst]

Yes. Am I audible?

[Rakesh Kumar, analyst]

Yes.

[Atul Goel, executive]

Yes, yes. Please, Anusha -- please, go ahead.

[Unknown Analyst]

Sir, I would want to know that how much ROA, exit ROA that you're expecting for the current fiscal and say for FY '25, and what will drive the number?

[Atul Goel, executive]

Anusha, as far as my ROA is concerned, it has reached to 0.46%. If you will take for the half year, already, we have crossed around INR 3,000 crore in net profit, and I'm hopeful whatever the guidance we have given, the same, I think we will be in a position to maintain the next half year also. You can calculate it will be around 0.4% because last time, it was 0.17%. Then we have given the guidance it will be double of the whatever, the ROA we have achieved in the last year. It will be further better. And as far as 1% ROE is concerned, which is the normally analyst ask when you will be in the position to 1%? I think by the exit of the '24, '25, we will be in a position to achieve the 1% ROA.

[Unknown Analyst]

'24 or '25?

[Atul Goel, executive]

'24, '25, year. At the exit of the '25.

[Unknown Analyst]

Yes. Okay, sir. And what are the [indiscernible] provision that you need to make for this -- how much you have done in the first half? And what will be for the full year wage revision provisions?

[Atul Goel, executive]

The first half may be I have already provided. INR 283 crore we have provided in the June quarter. INR 694 crores we have provided in the September quarter. Around INR 1,000 crores, around INR 1,000 crores, little by INR 950 crore, we have already provided in the current half year.

[Unknown Analyst]

So why there was increase in this Q2?

[Atul Goel, executive]

As I told you, I explained the question of the Mahru also. Last time [indiscernible] around 15%. But we are providing around 10%. So I think now this is the reason we have increased the provision for the wage revision.

[Rakesh Kumar, analyst]

Could I request Mr. [indiscernible] to go ahead with the question.

[Unknown Analyst]

One is, when would you expect your net NPA to fall below 1% given your slippages are low...

[Atul Goel, executive]

March '24 we have already given the guidance for the net NPA below 1%. I'm confident, fully confident it will be below 1% in March '24.

[Unknown Analyst]

So, sir, then your guidance on ROA seems conservative because then you'll start fiscal '25 with a normalized P&L, if I can so call it. So what would you the additional provisions to -- for your guidance for Q4 of fiscal '25?

[Atul Goel, executive]

You are very much right, [indiscernible]. As on date, we are thinking we will be in a position to achieve the ROA 1% by the exit of the '24, '25, but we will see. Because last -- if you see the last quarter also, June, we have give the guidance our gross NPA will be 7% in the March '24, but we -- since we have already achieved 7.73 in the June, we will revise. it will be 6%.

Similarly, the net NPA, we have given the guidance for the 2% since we have already achieved less than 2% in the quarter itself. We have revised 1%. we will see. As on date, my guidance is we would be in a position to achieve the ROA of the 1% by the exit of the '24, '25, but we will see. We are working hard. We are in a position to achieve much below also.

[Unknown Analyst]

Okay, sir. You seem conservative. The second question, sir, is on your deposits. What will be the on-book term deposit cost and what -- versus the incremental? I'm just trying to figure out the differential right now.

[Atul Goel, executive]

As far as my cost of deposit, it is 0.84%. As on date, I'm giving the 1 year -- even [indiscernible], where I am giving the 7.25%, 7.25% for 444 days. Normally, you can think because whatever the deposit has not been repriced. As on date, my growth on the term deposit would be around 6.5 to 7.10.

[Unknown Analyst]

And your on book will be about what, 6-odd percent average terms deposit?

[Atul Goel, executive]

Yes. We are on the same line, yes.

[Rakesh Kumar, analyst]

I will request Jai to go ahead with the questions.

[Jai Mundhra, analyst]

Congratulations on a great set of results. Sir, first question is on your interest income, right? So of course, the bank has done phenomenally well on slippages being now -- or recovery being 2x of slippages. So I think that also has some positive implication on the interest income. So I wanted to check what is the, let's say, interest income that has come from NPA recovery that may have...

[Atul Goel, executive]

INR 500 crore, around INR 500 crore quarterly is coming in the interest income by way of the recovery on the NPA account. Sometimes plus, minus, [Foreign Language] normally, we are achieving the number of INR 500 crore. Yes.

[Jai Mundhra, analyst]

Right. So that is only limited till INR 500 crores, right? Hello?

[Atul Goel, executive]

Yes, yes, please. Yes, please.

[Jai Mundhra, analyst]

Yes. Okay. So sir, if going ahead, let us say, the slippage -- I mean, the recovery, if they were to, let's say, moderate because most of the large ticket NCLT cases have almost come to a -- or drying up, would that have some implication on your NII apart from change in the interest rate cycle? Yes.

[Atul Goel, executive]

It cannot be on account of the one region. There is so many factors of the improvement of the NII. First, how your deposit is behaving? Whether you are in a position to improve your CASA? Whether improving the saving account where the improvement in the current account?

Second in the asset quality also. Forget about the [indiscernible]. First whether you are in a positoin to improve your yield on the advance also, which for the new acquisition also. I have given the data for the new acquisition. Where we are seeing the 0.24 is the -- only the [indiscernible]. That is also [indiscernible] for the NII.

Third is the recovery from the NPL. So it is a combination of the all. As I told you, at around INR 400 crore to INR 500 crore. It is not only this quarter as some INR 400 crore, INR 500 crore. It is INR 500 crores, INR 400 crore increase in the current quarter on NII, it is not always on the recovery. Even the earlier quarter also, we are getting sometimes INR 100 crore plus minus is there So since we are making the recovery is the focus area, some of the amount is coming in the interest income, some is coming in the technical [indiscernible] of account. It is a combination of all.

Your question -- specific question about the NCLT also. Then -- in NCLT, then we have to see how much we have to do the write-off? What is the amount of the recovery we are making in that particular account? If we are making the recovery, normally, you are aware? That is the published data how much we are in a position to percentage of the recovery in the NCLT accounts.

So in NCLT account, at the time of the recovery, I think there is no booking of the income. That is not under the plan, which is approved by the NCLT. But definitely, whatever the recovery we are making, either the normal recovery or the NCLT, that definitely will improve my NII. Because as on date, I'm not earning anything out of it. Moment I will make the recovery, that recovery will start yielding around 7% to 8%.

[Jai Mundhra, analyst]

Right, right. Okay. Okay. Understood, sir. And what would be your deferred tax assets? And is there any plan to move to new tax regime in the near term?

[Atul Goel, executive]

As on date, we have not decided. Definitely, we are working on it. We are taking the -- we have under discussion with our test consults also. As on date, we have not decided, but definitely in times to come, we will think and -- with the help of our income tax consultant. As on date, around INR 25,000 crore is the DTA.

[Jai Mundhra, analyst]

And sir, what could be the quarterly absorption of this DTA? So let's say, assuming you keep the similar amount of PPOP, I mean operating profit. By when this DTA will come to a manageable level or to a level...

[Atul Goel, executive]

It is a very large number as on date because you must have seen what is the provision I have made. It is in the range of the INR 1,000 crore. So INR 1,000 crore definitely some part will be reduced on the DTA also. So it will take a lot of time also As I told you, we are under discussions with out tax consultant also. Because then we have to see the impact. Whatever the current tax rate, 30% beneficial or we should move to the true tax rate also. That is under discussion.

[Jai Mundhra, analyst]

Right. And last question, sir, on your 1% ROA threshold, right? So I take your point that by this year, you would be exiting at 1% net NPA. So your credit cost should come down drastically. But even at PPOP level, right, somehow PNB seems to be having the lowest fee income, right, as a percentage of assets.

The banks, which are delivering 1% ROA now on revenue margins, you would be similar. But I think the fee, there is a 40, 50-basis-point gap between PNB and then. So is there any conscious effort to address this gap also? Margins and credit costs, I think, anyway, you are very much on track. So any thoughts on improving? Or is there a thought process to plug that fee income gap?

[Atul Goel, executive]

Yes, yes. We are very much aware, Mundhra, of this also and it a regular part of our discussions also. We are trying how to improve the other income by way of the noninterest income, then how we can increase the third-party product also. Even there was a discussion in the Board also how we can increase the the ForEx income also. That is on our radar also, and we are taking the [indiscernible] step to increase the other income also.

[Rakesh Kumar, analyst]

I will request [indiscernible] to go ahead with the question.

[Unknown Analyst]

Excellent result. Sir, my first question is your outlook on international book, treasury book and on your subsidiaries.

[Atul Goel, executive]

As far as overseas book is cancered, [Foreign Language] about the -- I will talk about the advanced portfolio. Around [ 35,000 to 36,000 ] is how outstanding as on date in the overseas book also. And we are trying to improve it also. There is a growth of around if you see the 9.9% growth is there in the overseas book. Because you are aware how the global economy is behaving. We are not putting pressure on our overseas branches because we are having only 2 branches, Dubai and [indiscernible]. So I think 9.9%, which is the growth they have achieved, I think it is a reasonable also around INR 36,000 crores.

As for our subsidiaries are concerned, subsidiary, I've already just given the answer. All the -- there is no plan as on date for monetizing of any subsidiary also. All the subsidiaries or the associated companies are doing well. What was your third quarter...

[Unknown Analyst]

I was not asking from a monetization perspective, but for the investment, which you've made in subsidiary and they're doing well. You had a change of CEO, the outlook is getting better. So there will be quite a rich reward to PNB with the future outlook. So that was my question. The third question is...

[Atul Goel, executive]

Yes, yes. That was the story of the PNB Housing Finance so much have seen the result also. they published their results 2, 3 days back also. They are doing -- they are making good recoveries also. They are making growth also. So I think all the my subsidiary, even the -- there was a a little bit issue in the PNB that is only on account of the change in the interest rate, on account of the [indiscernible] because they are dealing in the government. [indiscernible] HSBC also doing good. I think all the my subsidiaries are doing very good job.

[Unknown Analyst]

Sir, what's the outlook on treasury on India?

[Atul Goel, executive]

As far as treasure is concerned, you see 7.31 was the 10-year GSEC in the March, which has reduced to 7.11 in the June 2023. As on date, today, I was coming 7.36 was in the morning yesterday. There was some [indiscernible] in the U.S., it has increased to 7.38%. I think this is not only the Punjab National Bank. It will be very difficult to make this money out of the treasury profit in times to come unless or until rate has [indiscernible].

Even there will be a mark-to-market loss also because whatever the provision you have made at a particular date, there will be a mark-to-market a little bit loss also. But we are not [indiscernible] because we are not dependent on the treasury income also. If you see the treasury income is hardly INR 136 crore in the current quarter. Current quarter means, September quarter. Even we have posted the operative profit more than INR 6,000 crores. We have adequate provision for the wage revision. And there, I think we are not dependent though. We are not worried, but we will not allow the opportunity to go if there is a chance to make the money out of the treasury.

[Unknown Analyst]

Does it mean that your focus on advances, which is doing well, would reward the bank in second half much better than the first half?

[Atul Goel, executive]

Yes, yes, definitely. Definitely, yes.

[Rakesh Kumar, analyst]

[indiscernible] go ahead with the question.

[Atul Goel, executive]

Sanjeev, please go ahead.

[Unknown Analyst]

And congratulations for fine set of numbers. I have send a note that I just wanted to understand how many of the branches we own, and how much is -- how many of them are on lease? And how much we have added from OBC, which are owned or leased? So the total sum, and have we reorganized anytime during all these years -- have we clubbed them or have we reduced some expenses on that side? Or have we ever thought of monetizing our own and optimizing them? So this is the question because now the digital world is taking shape very fast, so how we can use those assets better? So that was my question, sir, and how we are...

[Atul Goel, executive]

Actually I will give the answer of your question. It is a mix of the both the side. Some of the branches on the lease accommodation, some of the branches we own also. It is not the we have taken the branches from the OBC.Even in the model of the PNB also we were having some of the own branches, some of the branches on the lease similarly with the United Bank of India, similarly the the [Foreign Language]. And we are aware. And we are here we are knowing the bank also. 2 banks in the U.K., 1 bank in the Korea, they don't have any branch also. But your specific question, we are doing a monetizing also. Last year, around 1,000 bunches, which was very near to one of the other branches, 1,000 branches, we have merged with the another braches.

[Unknown Analyst]

Very nice, sir. And any plan to monetize any of the assets, which may be in the main area of -- I mean, old PNB owned and added with the merger of the banks. Have you ever looked at the market value of all these, and how much we can monetize?

[Atul Goel, executive]

There is a 2 types of the monetization. First, monetizing is whatever investment we have made in our subsidiary associate. As on date, there is no. But as far as your specific question regarding monetization the assets, definitely, we are doing. Last year also we are doing, currently we are also doing, and we are seeing we are having the [indiscernible] or et cetera, so there is no need, and then we are monetizing. But that is not a very big amount. Yes.

[Unknown Analyst]

Not big amount, and not likely to be a big amount in coming years?

[Atul Goel, executive]

Yes, yes.

[Rakesh Kumar, analyst]

I would request Kunal go ahead with the question.

[Unknown Analyst]

So firstly, on the deposit side, even though the guidance is -- target is 10%, 11-odd percent. But if we really look at it in terms of the year-to-date, the growth is quite muted, and private banks are also getting very aggressive in terms of raising the deposits. So do we see in terms of like clear loss in market share? And given that domestic [indiscernible] ratio is still at 70%, 71-odd percent, we might still continue to see the loan growth coming through without much traction on the deposit side. And how is -- how the bank is preparing itself for competition from the private banks, yes?

[Atul Goel, executive]

Kunal, as far as PNB is concerned, there is no issue of raising the deposit, we can raise also. And there is no competition from the private bank also. We are any 10,000 branches. We are having 10,000 branches and -- see not only even that apart from that 29,000 PC channel also. And if you see the whatever the account we have opened in '22, '23. 85 lakh account we have opened in the first quarter itself. We have opened around 51 lakhs. If we -- we will, with the same rate, more than 1 crore account we will be opening.

Similarly, the current account. 2 lakh account we have opened in '22, '23 in the first half is 1.47. Deliberately, we are not giving the rate for the bulk deposit. Any time we can raise. Raising deposit is not an issue, but what I will do with that deposit? Because as on date, what is my requirement of the SLR? 18%. I am sitting on the SLR of the 6%. Where I can get the money at -- 6.75%.

Deliberately, we are not participating in any bid for the bulk deposit. And we are concentrating on the CASA. You must have seen already the more than INR 4 lakh crore we are having in the [indiscernible]. There is a growth of the 4%. Immediately, there is no need for raising the deposit, high cost debt, there is no need. And you have seen growth of the 11% to 13%, 13% growth of the advances has been taken care by the 9% growth rate. No issue. No challenge as far as deposit is concerned. We don't have any competition with the private bank also.

[Unknown Analyst]

Okay. Sure. And secondly, if you can just repeat in terms of the slippage breakup. So just missed that across the segments.

[Atul Goel, executive]

Yes. Slippage breakup is the sector-wise. Agri, it is [ 424 ]. SME [ 683 ]. Retail is [ 420 ], other [ 223 ]. Existing account [ 75 ]. Even it is a balance now. It is not coming from the one segment agriculture [Foreign Language] even the MSME is too much. It is balanced. Even the corporate, it is negligible. Corporate, it is not coming.

Some of the corporate, although SME of the limited companies, they will come on corporate, but there is no too much. MSME some part of the corporate may be there. yes.

[Rakesh Kumar, analyst]

I'll request [indiscernible] to go ahead with the question.

[Unknown Analyst]

Just 1 question from my side. Can you share the number of AS15 provisions for this quarter?

[Atul Goel, executive]

AS15 provisions? AS15 provision in the last quarter. Okay. Last quarter, it was -- I will given the number of the last quarter also. It is INR 580 crore for this current quarter. And the last quarter, it was INR 1,240 crore.

[Rakesh Kumar, analyst]

[indiscernible] do you have any questions? Mahrukh, do you have any questions -- follow-up questions?

[Mahrukh Adajania, analyst]

No, Rakesh, sorry, no thanks.

[Rakesh Kumar, analyst]

Okay. Your hands are still raised. Okay. No problem. Anusha, do you have any questions now. [indiscernible], do you have any follow-up questions? [indiscernible], please go ahead with your question.

[Unknown Analyst]

Just quickly wanted to understand in your NIM's calculation guidance, you actually indicated at 2.9% to 3% for the end of the year. Could you also indicate what are your yield assumptions and the cost assumptions?

[Atul Goel, executive]

As far as the -- as I told you earlier also, because some of the deposit has to be repriced so there may be increase of 10 to 15-basis-point in my cost of impose, which is running around 4.8%, 4%. This is the 1 point. Second is the -- as on date, if you see my NIM is around 3.11%.

On account of the repricing of the deposit, we are giving the guidance for the 2.9% to 3%. But we are giving another guidance also, whatever we are having in the absolute number NII, I think we will be in a position to maintain the NII in the absolute number because sometimes -- why I'm telling this [indiscernible] because sometime, you are not getting the [indiscernible] even 50-basis-point or 75-basis-point [indiscernible] advances.

If opportunities are available where I will get the only NIM of around 0.5 or 0.2, why should I allow the opportunities to go? In terms of the percent, the NIM may be reduced, but absolute number, it will be increased.

[Rakesh Kumar, analyst]

Sachin, have you got your answer or do you have any follow-up questions?

[Unknown Analyst]

I could not agree with myself. Okay, sure. So on a follow-up with that, if you were to look at your loan book right now, is there any part of your loan book, which has to be repriced on account of change in base rate? The floating to the fixed rate mix, what would that be right now?

[Atul Goel, executive]

[indiscernible], as far as my book is, my [indiscernible] book is on the floating rate of interest. [indiscernible] around 3.68% because it is keep on changing. Because it is very difficult to answer your question because sometimes we have given the loan on the 3-month MCLR. We have given loan on the 6-month MCLR. Sometimes we have given loan on the 1-year MCLR, and it keep on changing. At the time of the repricing of the interest rate, definitely, it will be changed.

But as far as GPO is concerned, which is around 30%, 27%, and the [indiscernible] is 10%, I think unless and until they will not be increased in the repo, that will not be repriced. but MCLR, because it is a regular process every time we are -- every month, we are changing the MCLR also. Some of the loan definitely will be repriced.

[Unknown Analyst]

Okay. And my last question is on the gross slippage of INR 1,700 crores. What would be the interest income write-back on that in absolute amount?

[Atul Goel, executive]

Actually, it will be around 2.5% of the total -- whatever the slippage. Because in some of the account we have got the interest recovery also. Normally, if you see, we are charging around 8% to 9% crore rupees, INR [ 280 ] crores is around 2% of the outstanding. But in some of the account, there was a part [indiscernible] service was also available.

[Rakesh Kumar, analyst]

Okay. Sir, just 1 question from my end, sir, with respect to capital.

[Atul Goel, executive]

Please, go ahead.

[Rakesh Kumar, analyst]

Yes, sir. Just 1 last question, sir. I think we are coming into the of the session. Sir, the CET capital of 10.2%, would we need any core equity capital in the next 2 months?

[Atul Goel, executive]

As far as [indiscernible] 10.23% is concerned, what is the regulatory requirement? Regulatory requirement is only 8%. We are having, as on date, 2.23% excess capital. But we have to see what will be my growth also. And not immediately because in the March quarter, you have seen what is my profitability as on date. INR 3,000 crore is my profitability, which we are not adding at the time of calculation of the capital adequacy. If we take the ballpark number INR 6,000 crore will be the profitability then whatever the dividend we will declare. Remaining will add to my only CET1 also.

Why we are not raising the CET1 from the market because my price is undervalued as on date. Because to serve the equity is also challenge. Moment we will be in a position to see what should be my price -- improved price has come in the market, then only we will hit the market. As on date, there is no immediate need because we are having more than 2% [indiscernible] CET1 and some of the profitability we will be adding in the next 6 months also.

As of date, there is not much challenge. Definitely, if we will make a growth target of the 20%, 25%, whatever your question, Rakesh, then there may be an immediate need also, then we can think immediately to raise the equity by way of [indiscernible] or any other mode, which is available.

[Rakesh Kumar, analyst]

Understood, sir. Very well understood, sir. I think, sir, we have come close the -- our time slot and there are no further questions also. So I would request you to, sir, kindly give a closing remark to the audience and the investors.

[Atul Goel, executive]

Thank you very much, Rakesh, jee. My closing remarks will only this, bank is doing very well. And I want to tell to all my analysts or the investor community also because some of the things, which is not reflecting in the number, there is the digital transformation that is the HR transformation.

Digital transformation last we have started in the June '22, around 36 projects we have [indiscernible] product and services, we will add around 70. Similarly, the HR transformation benefit of which we will be getting accrued in the March '24, that is under way. And bank is on the very right track. You see that there is a lot of improvement in the quality of the assets also and the operating property is increasing. And the slippage -- one thing with slippage also because slippage is under control. INR [ 1,800 ] number we have reached And in the quarters to come also, we are hopeful and we are confident number should be reduced if there is not so many -- there is no any lumpy account where we are thinking there will be any issue also.

The net profit is also increasing, INR 300% increase in the profitability last time also there was a good increase in the profitability. And on account of this 91% of the PCR, I am hopeful that you all will be [indiscernible]. The NPA provision requirement will reduce gradually, drastically -- there will be drastic reduction on the NPA provision, which is the major -- which was the major concern in the our banks also. So whatever the NPA we are having INR 90,000 crore, [indiscernible] and INR 65,000 crore, I think that is our gold mine. And whatever the recovery we will be making in times to come, definitely, that will be added to my bottom line, either in the operating profit, either it is by way of the reversal of the provision or whether any increase in the net profit. And whatever the target we are giving 41% ROA at the exit of the '24, '25. We will see in times to come whether we are in a version to make this before that also. This is my closing remark. And once again, my sincere thanks to all the analysts and the investor also who have attended over -- this con call also. Thank you very much.

And thank you to, Rakesh, jee, also for arranging this call also.

[Rakesh Kumar, analyst]

[indiscernible] Se curites would like to thank PNB, entire management team, analysts, investors to participate in the call. Thanks for taking your time out. Now we have come to the close to the session. Thanks, everyone. Thank you, sir.

[Atul Goel, executive]

Thank you. Thank you. Thank you, Rakesh.

[Rakesh Kumar, analyst]

Thank you. Thank you, sir.

We can log out now. Thanks.