PNB

PNB as it is more popularly recognized, the bank is a little better off than Q4FY13. In the previous quarter, it had a 21% decline in net profit and 44% rise in net provisions but NPAs had shown a decline.  The market then had punished the stock for the slip in profit. But this around, in Q1FY14, the bank has posted a 2.3% (YoY) rise in net profit at Rs.1275 crore and NII was better-than-expected at Rs.3907 crore, up 6%. the savior was other income, which rose 15% (yoY) at Rs.1342 crore.

 But the big worry which pushed the stock to a four-year low was the rise in NPAs.  There was a sharp rise in its Gross NPAs from 3.34% to 4.84% and much higher than 4.27% in March. Net NPA also rose from 1.68% to 2.98% (YoY). Provisions and contingencies rose 3.3% at Rs.1,066 crore while provision coverage ratio was lower at 54.67% at end of quarter v/s 58.8% (YoY). It is this lower provision coverage which helped the bank post a marginal rise in net profit. Capital adequacy ratio (as per Basel III) stood at 11.79%. The stress on the asset quality has truly spooked the markets and it would take a while for the market to reinstate faith back into the stock. More asset stress is foreseen and best to wait on the sidelines.