Month: November 2021

Former SBI Chairman Pratip Chaudhuri arrested in loan scam case

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Former State Bank of India Chairman Pratip Chaudhuri was arrested on Sunday from his Delhi home in a case related to a hotel group in Jaisalmer.

The case is related to a hotel property owned by Godawan group that SBI seized after it was declared as a nonperforming asset (NPA). It is learnt that the loan amount involved in 2008 was ₹24 crore.

It maybe recalled that Chaudhuri had assumed charge as SBI Chairman on April 7, 2011 and retired on September 30, 2013.

Chaudhuri was arrested by Jaisalmer police on Sunday on the basis of arrest orders issued by the Chief Judicial Magistrate Court at Jaisalmer. The hotel property of Godawan Group was seized in lieu of the loan extended by SBI. Pratip Chaudhuri was the Chairman of SBI at that time when the property was seized.

With SBI selling the confiscated property in 2016 to Alchemist ARC, an asset reconstruction company, the hotel group went to court claiming that the bank transferred the property to ARC at much lower rate than the then prevailing market rate.

Interestingly, Chaudhuri had after retirement joined the Alchemist ARC company as director.

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Banks attract more home loan customers during this festival season

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Banks seem to be showing a distinct preference for growing their home loans within retail loans during the ongoing festive season, going by the recent interest rate cuts effected by them.

Most of the banks have announced reduction in home loans interest rates, which are now at an all time low, but interest rates on other loans such as vehicle loans and unsecured personal loans have been left more or less unchanged.

Among the banks that have announced home loan rate cuts during the ongoing festive season include Kotak Mahindra Bank (from 6.65 per cent to 6.50 per cent), State Bank of India (from 6.80 per cent to 6.70 per cent), Bank of Baroda (from 6.75 per cent to 6.50 per cent), Punjab National Bank (from 7.10 per cent to 6.60 per cent on home loans above ₹50 lakh), and Union Bank of India (from 6.80 per cent to 6.40 per cent).

Depending on a prospective borrower’s credit score, the banks would add credit spread to the aforementioned rates.

This cut in home loan rates comes even as industry experts believe there could be a dampening effect on the demand for cars (and in turn for loans to buy them) due to manufacturers passing on increase in raw material prices to customers in the last few months and rising fuel prices.

Also read: Healthy growth in home loans, may consider extending festive offer: Kotak Mahindra Bank

Bankers are also wary of the possibility of stress building up in the unsecured personal loans portfolio.

Further, banks no longer enjoy the advantage they had over gold loan companies (GLCs) last year (between August 6, 2020 and March-end 2021), when the Reserve Bank of India (RBI) allowed the former to offer loans for up to 90 per cent of the value of gold ornaments and jewellery to mitigate the economic impact of the Covid-19 pandemic on households, entrepreneurs and small businesses.

Now, with a level playing field having been created (both banks and GLCs can offer loans up to 75 per cent of the value of gold ornaments and jewellery), nifty GLCs can attract the customers they lost to banks during the aforementioned period.

Low risks

Banks consider housing loans as the best bet to grow their retail loan portfolio due to the relatively low risk of default, lower risk weights (whereby the minimum capital that needs to be set aside to mitigate default risk has been brought down up to March 31, 2022) and availability of strong collateral, according to banking expert V Viswanathan.

As per the monetary policy report, in respect of fresh rupee loans linked to the policy repo rate, the spread – weighted average lending rate (WALR) over the repo rate – charged by domestic banks during August 2021 was the lowest in the case of housing loans and the highest in the case of other personal loans, in line with their risk profiles.

In the case of home loans linked to external benchmark, the spread of WALR over the repo rate during August 2021 was 3.19 per cent for domestic banks. The aforementioned spread in the case of vehicle loans and other personal loans was at 3.60 per cent and 4.98 per cent, respectively.

Repo rate is the interest rate at which banks draw funds from RBI to overcome short-term liquidity mismatches. Currently, this rate is at 4 per cent.

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2 Banking And Financial Services Stocks To Buy For Good Gains

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Buy SBI Life Insurance

The firm has set a price target of Rs 1,500 on the stock of SBI Life Insurance as against the current market price of Rs 1,155.

SBI Life Insurance reported a strong 2QFY22, with APE growth of 46% YoY (5% beat) and VNB growth at a stellar 91% YoY (10% beat). VNB margin improved to 25.9% (up 560bp YoY). However, shareholders’ PAT declined by 18% YoY on account of higher claims settled in 2QFY22.

“Persistency has improved across cohorts on a YoY basis, with 13th/49th month persistency improving by 180bp/300bp YoY to 87.7%/69.3% and steady trends in the 61st month to 60.7%,” the brokerage has said.

“SBI Life Insurance continues to maintain its cost leadership, while persistency trends have improved on a YoY basis. We estimate APE growth at 23% CAGR over FY21-24E. VNB margin is estimated to reach 26.2% by FY24E, thus enabling 28% VNB CAGR and 18% EV CAGR over FY21-24E. We maintain our Buy rating with a revised target price of Rs 1,500 per share (2.7x Sep’23E EV),” the brokerage has said.

Buy IndusInd Bank

Buy IndusInd Bank

Motilal Oswal has set a price target of Rs 1,400 on the stock of IndusInd Bank. Loan growth picked up sharply, led by Corporate and MFI/Credit Cards, while the Vehicle book remains muted. Retail disbursements have crossed pre-COVID levels across most segments. Deposit trends continue to remain strong, led by Retail term deposits.

“IndusInd Bank reported an in line operating performance, with loan growth witnessing traction, while its liability franchise continues to improve, driving a consistent reduction in funding cost.

“We expect IndusInd Bank to deliver a FY23E RoA/RoE of 1.8%/15.1%. We roll forward our estimates to Sep’23E and maintain our Buy rating with a target price of Rs 1,400 per share (1.9x 1HFY24E ABV),” the brokerage has said.

Disclaimer

Disclaimer

The above stocks are picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.



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Reserve Bank of India – Press Releases

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(Amount in ₹ crore, Rate in Per cent)
  Volume
(One Leg)		 Weighted
Average Rate 		Range
A. Overnight Segment (I+II+III+IV) 0.00 – –
     I. Call Money 0.00 – –
     II. Triparty Repo 0.00 – –
     III. Market Repo 0.00 – –
     IV. Repo in Corporate Bond 0.00 – –
B. Term Segment      
     I. Notice Money** 0.00 – –
     II. Term Money@@ 0.00 – –
     III. Triparty Repo 0.00 – –
     IV. Market Repo 0.00 – –
     V. Repo in Corporate Bond 0.00 – –
  Auction Date Tenor (Days) Maturity Date Amount Current Rate /
Cut off Rate
C. Liquidity Adjustment Facility (LAF) & Marginal Standing Facility (MSF)
I. Today’s Operations
1. Fixed Rate          
     (i) Repo          
    (ii) Reverse Repo Sun, 31/10/2021 1 Mon, 01/11/2021 8,289.00 3.35
    (iii) Special Reverse Repo~          
    (iv) Special Reverse Repoψ          
2. Variable Rate&          
  (I) Main Operation          
     (a) Reverse Repo          
  (II) Fine Tuning Operations          
     (a) Repo          
     (b) Reverse Repo          
3. MSF Sun, 31/10/2021 1 Mon, 01/11/2021 14.00 4.25
4. Special Long-Term Repo Operations (SLTRO) for Small Finance Banks (SFBs)£          
5. Net liquidity injected from today’s operations
[injection (+)/absorption (-)]*		       -8,275.00  
II. Outstanding Operations
1. Fixed Rate          
    (i) Repo          
    (ii) Reverse Repo Sat, 30/10/2021 2 Mon, 01/11/2021 61,323.00 3.35
  Fri, 29/10/2021 3 Mon, 01/11/2021 184,740.00 3.35
    (iii) Special Reverse Repo~ Fri, 22/10/2021 12 Wed, 03/11/2021 5,465.00 3.75
    (iv) Special Reverse Repoψ Fri, 22/10/2021 12 Wed, 03/11/2021 2,900.00 3.75
2. Variable Rate&          
  (I) Main Operation          
     (a) Reverse Repo Fri, 22/10/2021 12 Wed, 03/11/2021 418,395.00 3.99
  (II) Fine Tuning Operations          
     (a) Repo          
     (b) Reverse Repo Tue, 26/10/2021 7 Tue, 02/11/2021 200,019.00 3.99
3. MSF Sat, 30/10/2021 2 Mon, 01/11/2021 0.00 4.25
  Fri, 29/10/2021 3 Mon, 01/11/2021 455.00 4.25
4. Long-Term Repo Operations# Mon, 17/02/2020 1095 Thu, 16/02/2023 499.00 5.15
  Mon, 02/03/2020 1094 Wed, 01/03/2023 253.00 5.15
  Mon, 09/03/2020 1093 Tue, 07/03/2023 484.00 5.15
  Wed, 18/03/2020 1094 Fri, 17/03/2023 294.00 5.15
5. Targeted Long Term Repo Operations^ Fri, 27/03/2020 1092 Fri, 24/03/2023 12,236.00 4.40
  Fri, 03/04/2020 1095 Mon, 03/04/2023 16,925.00 4.40
  Thu, 09/04/2020 1093 Fri, 07/04/2023 18,042.00 4.40
  Fri, 17/04/2020 1091 Thu, 13/04/2023 20,399.00 4.40
6. Targeted Long Term Repo Operations 2.0^ Thu, 23/04/2020 1093 Fri, 21/04/2023 7,950.00 4.40
7. On Tap Targeted Long Term Repo Operations€ Mon, 22/03/2021 1095 Thu, 21/03/2024 5,000.00 4.00
  Mon, 14/06/2021 1096 Fri, 14/06/2024 320.00 4.00
  Mon, 30/08/2021 1095 Thu, 29/08/2024 50.00 4.00
  Mon, 13/09/2021 1095 Thu, 12/09/2024 200.00 4.00
  Mon, 27/09/2021 1095 Thu, 26/09/2024 600.00 4.00
  Mon, 04/10/2021 1095 Thu, 03/10/2024 350.00 4.00
8. Special Long-Term Repo Operations (SLTRO) for Small Finance Banks (SFBs)£ Mon, 17/05/2021 1095 Thu, 16/05/2024 400.00 4.00
Tue, 15/06/2021 1095 Fri, 14/06/2024 490.00 4.00
Thu, 15/07/2021 1093 Fri, 12/07/2024 750.00 4.00
Tue, 17/08/2021 1095 Fri, 16/08/2024 250.00 4.00
Wed, 15/09/2021 1094 Fri, 13/09/2024 150.00 4.00
D. Standing Liquidity Facility (SLF) Availed from RBI$       21,695.80  
E. Net liquidity injected from outstanding operations [injection (+)/absorption (-)]*     -765,049.2  
F. Net liquidity injected (outstanding including today’s operations) [injection (+)/absorption (-)]*     -773,324.2  
G. Cash Reserves Position of Scheduled Commercial Banks
     (i) Cash balances with RBI as on 31/10/2021 612,823.24  
     (ii) Average daily cash reserve requirement for the fortnight ending 05/11/2021 636,507.00  
H. Government of India Surplus Cash Balance Reckoned for Auction as on¥ 29/10/2021 0.00  
I. Net durable liquidity [surplus (+)/deficit (-)] as on 08/10/2021 1,192,495.00  
@ Based on Reserve Bank of India (RBI) / Clearing Corporation of India Limited (CCIL).
– Not Applicable / No Transaction.
** Relates to uncollateralized transactions of 2 to 14 days tenor.
@@ Relates to uncollateralized transactions of 15 days to one year tenor.
$ Includes refinance facilities extended by RBI.
& As per the Press Release No. 2019-2020/1900 dated February 06, 2020.
* Net liquidity is calculated as Repo+MSF+SLF-Reverse Repo.
# As per the Press Release No. 2020-2021/287 dated September 04, 2020.
^ As per the Press Release No. 2020-2021/605 dated November 06, 2020.
€ As per the Press Release No. 2020-2021/520 dated October 21, 2020, Press Release No. 2020-2021/763 dated December 11, 2020, Press Release No. 2020-2021/1057 dated February 05, 2021 and Press Release No. 2021-2022/695 dated August 13, 2021.
¥ As per the Press Release No. 2014-2015/1971 dated March 19, 2015.
£ As per the Press Release No. 2021-2022/181 dated May 07, 2021 and Press Release No. 2021-2022/1023 dated October 11, 2021.
~ As per the Press Release No. 2021-2022/177 dated May 07, 2021.
ψ As per the Press Release No. 2021-2022/323 dated June 04, 2021.
Ajit Prasad
Director   
Press Release: 2021-2022/1127

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HDFC Q2 net profit up 32%

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Housing Development Finance Corporation (HDFC) Ltd reported a 31.7 per cent jump in its standalone net profit for the second quarter of the fiscal at ₹3,780.5. Its net profit was ₹2,870.12 crore in the corresponding quarter last fiscal.

The net interest income for the half year ended September 30, 2021 stood at ₹8,255 crore compared to ₹7,039 crore in the previous year, representing a growth of 17 per cent.

The reported Net Interest Margin was 3.6 per cent.

“The demand for home loans continues to remain strong. Growth in home loans was seen in both the affordable housing segment as well as in high end properties. The increasing sales momentum and new project launches augurs well for the housing sector,” HDFC said in a statement on Monday.

During the half-year ended September 30, 2021, individual approvals and disbursements grew by 67 per cent and 80 per cent respectively compared to the corresponding period in the previous yea

Individual disbursements in the month of October 21 were the highest ever in a non-quarter end month, it further said.

The collection efficiency for individual loans on a cumulative basis improved to stand at over 98 per cent during the quarter ended September 30, 2021.

The provisions as at September 30, 2021 stood at ₹13,340 crore

As per regulatory norms, the gross non-performing loans as at September 30, 2021 stood at ₹10,341 crore. This is equivalent to 2 per cent of the loan portfolio compared to 2.24 per cent as on June 30, 2021.

As at September 30, 2021, loans restructured under the RBI’s Resolution Framework for Covid-19 Related Stress (OTR 1 & 2.0) was equivalent to 1.4 per cent of the loan book (as at June 30, 2021: 0.9 per cent of the loan book). Of the loans restructured, 63 per cent are individual loans and 37 per cent are non-individual loans. Of the total restructured loans, 35% is in respect of just one account.

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Capital Small Finance Bank files DRHP papers with SEBI, BFSI News, ET BFSI

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Capital Small Finance Bankhas filed its Draft Red Herring Prospectus with market regulator Securities and Exchange Board of India. Edelweiss Financial Services Limited, Axis Capital Limited and SBI Capital Markets Limited will be the book running lead managers of the issue.

The company plans to raise its initial public offering via a fresh issue of equity shares aggregating up to Rs. 450 crores and an offer for sale of up to 3,840,087 equity shares.

The offer for sale comprises up to 337,396 equity shares by PI Ventures LLP, 604,614 equity shares by Amicus Capital Private Equity I LLP, 70,178 equity shares by Amicus Capital Partners India Fund I and 836,728 equity shares by Oman India Joint Investment Fund II and up to 1,991,171 equity shares by certain person listed in DRHP.

The company has a good asset quality, with a GNPA of 2.08% and NNPA of 1.13%, lowest among its peers. They propose to utilise net proceeds from the fresh issue towards augmentation of the bank’s tier-I capital base to meet future capital requirements.



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Reserve Bank of India – Press Releases

Press Releases

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(Amount in ₹ crore, Rate in Per cent)
  Volume
(One Leg)		 Weighted
Average Rate 		Range
A. Overnight Segment (I+II+III+IV) 17,395.50 3.44 2.70-3.60
     I. Call Money 2,369.50 3.28 2.70-3.45
     II. Triparty Repo 14,985.00 3.47 3.25-3.60
     III. Market Repo 41.00 3.25 3.25-3.25
     IV. Repo in Corporate Bond 0.00   –
B. Term Segment      
     I. Notice Money** 72.80 2.79 2.75-2.85
     II. Term Money@@ 0.00 – –
     III. Triparty Repo 0.00 – –
     IV. Market Repo 0.00 – –
     V. Repo in Corporate Bond 0.00 – –
  Auction Date Tenor (Days) Maturity Date Amount Current Rate /
Cut off Rate
C. Liquidity Adjustment Facility (LAF) & Marginal Standing Facility (MSF)
I. Today’s Operations
1. Fixed Rate          
     (i) Repo          
    (ii) Reverse Repo Sat, 30/10/2021 2 Mon, 01/11/2021 61,323.00 3.35
    (iii) Special Reverse Repo~          
    (iv) Special Reverse Repoψ          
2. Variable Rate&          
  (I) Main Operation          
     (a) Reverse Repo          
  (II) Fine Tuning Operations          
     (a) Repo          
     (b) Reverse Repo          
3. MSF Sat, 30/10/2021 2 Mon, 01/11/2021 0.00 4.25
4. Special Long-Term Repo Operations (SLTRO) for Small Finance Banks (SFBs)£          
5. Net liquidity injected from today’s operations
[injection (+)/absorption (-)]*		       -61,323.00  
II. Outstanding Operations
1. Fixed Rate          
    (i) Repo          
    (ii) Reverse Repo Fri, 29/10/2021 3 Mon, 01/11/2021 184,740.00 3.35
    (iii) Special Reverse Repo~ Fri, 22/10/2021 12 Wed, 03/11/2021 5,465.00 3.75
    (iv) Special Reverse Repoψ Fri, 22/10/2021 12 Wed, 03/11/2021 2,900.00 3.75
2. Variable Rate&          
  (I) Main Operation          
     (a) Reverse Repo Fri, 22/10/2021 12 Wed, 03/11/2021 418,395.00 3.99
  (II) Fine Tuning Operations          
     (a) Repo          
     (b) Reverse Repo Tue, 26/10/2021 7 Tue, 02/11/2021 200,019.00 3.99
3. MSF Fri, 29/10/2021 3 Mon, 01/11/2021 455.00 4.25
4. Long-Term Repo Operations# Mon, 17/02/2020 1095 Thu, 16/02/2023 499.00 5.15
  Mon, 02/03/2020 1094 Wed, 01/03/2023 253.00 5.15
  Mon, 09/03/2020 1093 Tue, 07/03/2023 484.00 5.15
  Wed, 18/03/2020 1094 Fri, 17/03/2023 294.00 5.15
5. Targeted Long Term Repo Operations^ Fri, 27/03/2020 1092 Fri, 24/03/2023 12,236.00 4.40
  Fri, 03/04/2020 1095 Mon, 03/04/2023 16,925.00 4.40
  Thu, 09/04/2020 1093 Fri, 07/04/2023 18,042.00 4.40
  Fri, 17/04/2020 1091 Thu, 13/04/2023 20,399.00 4.40
6. Targeted Long Term Repo Operations 2.0^ Thu, 23/04/2020 1093 Fri, 21/04/2023 7,950.00 4.40
7. On Tap Targeted Long Term Repo Operations€ Mon, 22/03/2021 1095 Thu, 21/03/2024 5,000.00 4.00
  Mon, 14/06/2021 1096 Fri, 14/06/2024 320.00 4.00
  Mon, 30/08/2021 1095 Thu, 29/08/2024 50.00 4.00
  Mon, 13/09/2021 1095 Thu, 12/09/2024 200.00 4.00
  Mon, 27/09/2021 1095 Thu, 26/09/2024 600.00 4.00
  Mon, 04/10/2021 1095 Thu, 03/10/2024 350.00 4.00
8. Special Long-Term Repo Operations (SLTRO) for Small Finance Banks (SFBs)£ Mon, 17/05/2021 1095 Thu, 16/05/2024 400.00 4.00
Tue, 15/06/2021 1095 Fri, 14/06/2024 490.00 4.00
Thu, 15/07/2021 1093 Fri, 12/07/2024 750.00 4.00
Tue, 17/08/2021 1095 Fri, 16/08/2024 250.00 4.00
Wed, 15/09/2021 1094 Fri, 13/09/2024 150.00 4.00
D. Standing Liquidity Facility (SLF) Availed from RBI$       21,695.80  
E. Net liquidity injected from outstanding operations [injection (+)/absorption (-)]*     -703,726.2  
F. Net liquidity injected (outstanding including today’s operations) [injection (+)/absorption (-)]*     -765,049.2  
G. Cash Reserves Position of Scheduled Commercial Banks
     (i) Cash balances with RBI as on 30/10/2021 620,770.82  
     (ii) Average daily cash reserve requirement for the fortnight ending 05/11/2021 636,507.00  
H. Government of India Surplus Cash Balance Reckoned for Auction as on¥ 29/10/2021 0.00  
I. Net durable liquidity [surplus (+)/deficit (-)] as on 08/10/2021 1,192,495.00  
@ Based on Reserve Bank of India (RBI) / Clearing Corporation of India Limited (CCIL).
– Not Applicable / No Transaction.
** Relates to uncollateralized transactions of 2 to 14 days tenor.
@@ Relates to uncollateralized transactions of 15 days to one year tenor.
$ Includes refinance facilities extended by RBI.
& As per the Press Release No. 2019-2020/1900 dated February 06, 2020.
* Net liquidity is calculated as Repo+MSF+SLF-Reverse Repo.
# As per the Press Release No. 2020-2021/287 dated September 04, 2020.
^ As per the Press Release No. 2020-2021/605 dated November 06, 2020.
€ As per the Press Release No. 2020-2021/520 dated October 21, 2020, Press Release No. 2020-2021/763 dated December 11, 2020, Press Release No. 2020-2021/1057 dated February 05, 2021 and Press Release No. 2021-2022/695 dated August 13, 2021.
¥ As per the Press Release No. 2014-2015/1971 dated March 19, 2015.
£ As per the Press Release No. 2021-2022/181 dated May 07, 2021 and Press Release No. 2021-2022/1023 dated October 11, 2021.
~ As per the Press Release No. 2021-2022/177 dated May 07, 2021.
ψ As per the Press Release No. 2021-2022/323 dated June 04, 2021.
Ajit Prasad
Director   
Press Release: 2021-2022/1126

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UPI hits new record with ₹7.71-lakh crore worth of transactions in October

Banking & Finance

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Amidst festival season sales and opening up of the economy, UPI transactions touched a record high at ₹7.71 lakh crore in value terms in October.

This was a new record for UPI, which is fast becoming the most popular choice for digital payments. It was a 56 per cent jump from ₹6.54 lakh crore in transaction value recorded in September.

According to data released by National Payments Corporation of India on Monday, the number of transactions on the Unified Payments Interface platform amounted to 421 crore in October, compared to 365 crore in September.

Daily payments through UPI were averaging between ₹25,000 crore to ₹30,000 crore in October.

Also read: Mobile payments growing faster than card payments

The Immediate Payment Service (IMPS) also scaled a new high in October and processed 43.06 crore transactions worth ₹3.7 lakh crore. It had processed 38.48 crore transactions amounting to ₹3.24 lakh crore in September.

Meanwhile, there were 21.42 crore transactions via the NETC FASTags totalling ₹3,356.74 crore in October compared to 19.36 crore transactions worth ₹3,009.3 crore in September.

Mobile payments are now growing faster than card payments and are clocking over $1 trillion in annualised value in 2021, the 2021 India Mobile Payments Market Report by S&P Global Market Intelligence’s Financial Institutions Research team had said.

Also read: Strong growth in digital payments indicates a lasting shift in consumer payment behaviour

According to the report, payments made via apps that bypass credit card rails rose 67 per cent to $478 billion in 2020.

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Bank of Baroda to raise up to Rs 3,000cr via Basel III bonds, BFSI News, ET BFSI

Banking & Finance

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State-owned Bank of Baroda on Monday said it will raise up to Rs 3,000 crore by issuing Basel III compliant bonds in one or more tranches. The capital raising committee of the bank in a meeting on November 1, 2021 approved the issuance of Basel III compliant additional tier I/II bonds.

The bonds are to be issued for aggregate total issue size of Rs 3,000 crore in single or multiple tranches, the bank said in a regulatory filing.

To comply with Basel-III capital regulations, banks globally need to improve and strengthen their capital planning processes.

These norms are being implemented to mitigate concerns on potential stresses on asset quality and consequential impact on performance and profitability of banks.

Shares of Bank of Baroda were trading at Rs 99.30 apiece on BSE, up 1.85 per cent from previous close. PTI KPM DRR DRR

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Why analysts see no upside in PNB stock despite 78% jump in Q2 net, BFSI News, ET BFSI

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NEW DELHI: Punjab National Bank (PNB) reported a 78 per cent surge in September quarter profit, in addition to a three-fold jump in June quarter profits. Analysts, however, see no further upside for the stock that has underperformed the market this year with a 21 per cent return.

Analysts said the surge in earnings was mainly led by a reversal in tax and noted that operating performance for the quarter was fairly weak, with pre-provision operating profit falling 27 per cent YoY due to a 25 per cent decline in net interest income (NII).

Slippages were elevated at about Rs 9,080 crore, which were 5.4 per cent of loans, even as higher recoveries and upgrades helped the bank report a 70 basis points fall in gross NPA at 13.6 per cent.

Motilal Oswal Securities noted that the bank’s domestic margins also fell 36 basis points sequentially to 2.45 per cent due to an interest reversal of Rs 620 crore and few corporate loans being repriced at lower rates. Fee income fell 21 per cent sequentially. “PNB’s asset quality remained largely stable despite elevated slippages, supported by higher recoveries and upgrades. However, the bank’s restructured portfolio increased to 3.1 per cent of loans, for which it is carrying mere 10 per cent provisions. Also, SMA overdue stood at 3.7 per cent of loans, making us watchful of PNB over the near term,” Motilal Oswal said.

Emkay Global has retained its sell call on the stock due to slower growth, ongoing concerns around asset quality and subpar return ratios when compared with other public sector banks. It has valued the stock at Rs 35. “Credit growth was weak at 3 per cent YoY but PNB expects the growth run rate to improve to 6-8 per cent YoY by the end of FY22, aided by healthy growth in retail and some back-end support from corporates as well. That said, we believe overall NIMs are likely to remain under pressure due to slower growth and interest reversals on NPAs,” Emkay said.

Edelweiss shared similar concerns. It said asset quality shows persistent challenges, with slippages in excess of 5 per cent (annualised) and SMA-2 + restructuring at 2 per cent level. Soft business momentum reflected in a 30 per cent YoY dip in core profitability. “Still evolving stress and low provision stock forebodes elevated credit costs going forward, keeping us on guard. High stress, lower buffer, challenges on business and risk of subsequent Covid waves indicate that transition will be arduous and normalisation is still awaited,” said the brokerage. It has a hold rating on the stock with a target of Rs 42.

PNB closed at Rs 42.10 a piece on Friday, suggesting no upside.



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