Punjab National Bank (PNB) Q4 04/05 earnings summary

Executive summary

• FY05 net profit rose 27.2% YoY to Rs 1,410.12 crore; total business grew 21.0% to Rs 1,63,580 crore, exceeding the Rs 1,60,000 crore target.

• Deposits grew 17.4% to Rs 1,03,167 crore and advances 27.9% to Rs 60,413 crore; net NPA ratio fell to 0.20% from 0.98%.

• Operating profit declined to Rs 2,707.21 crore from Rs 3,120.86 crore, reflecting the absence of a prior-year one-time securities buyback gain and additional provisions.

Financial highlights

• Total income increased 5.1% YoY to Rs 10,136 crore; interest income rose 8.8% to Rs 8,460 crore, while non-interest income fell to Rs 1,676 crore from Rs 1,868 crore.

• Operating expenses rose 25.5% to Rs 2,975 crore; provisions and contingencies fell to Rs 1,297 crore from Rs 2,012 crore.

• Net profit was Rs 1,410.12 crore versus Rs 1,108.69 crore; EPS increased to Rs 52.93 from Rs 41.79.

• Adjusted for the prior-year Rs 293 crore one-time government-securities buyback gain, FY05 also included Rs 208 crore of securities depreciation provision and Rs 368 crore of additional gratuity and pension provision.

• Commission, exchange and brokerage income rose 25.2% to Rs 691 crore; spread was 3.33% at March 2005-end.

Outlook and guidance

• Strategic priorities: raise low-cost deposits, expand quality credit, reduce NPAs, strengthen asset-liability management, and improve productivity and customer service through HR and training.

• FY06 growth outlook depends on monsoon performance, oil and commodity prices, infrastructure constraints, fiscal consolidation and the current account deficit.

• Domestic rates were expected to remain stable near term; medium-term direction depends on credit growth, government borrowing and capital spending, capital inflows and global oil prices.

• PNB Parivartan, launched with Boston Consulting Group in July 2004, was expected to run 16 months, covering integrated risk management, organizational structure, product profitability and back-office centralization.