The third largest PSU bank, Punjab National Bank or PNB as it is more popularly recognized, the bank has slipped back from its Q1FY14 numbers where it had shown a 2% (YoY) rise in net profit and NII was also up 6%. Thus expectations had gone up for Q2 and when the numbers came in, it was a big disappointment. Though its Net Interest Income (NII) rose 10% (YoY) at Rs.4015 crore, its net profit slipped by a sharp 53% at Rs.506 crore and sequentially, it was down 60%. Slower loan growth and poor asset quality weighed heavy. Bank deposits grew much slower at 1.23% (YoY) and advances were a bit better at 6.46% growth.

Its Gross NPA rose to 5.14% v/s 4.84% In June and 4.66% in Q2FY13. Net NPA also deteriorated, coming in at 3.07% v/s 2.98% (QoQ) and 2.69% (YoY).  Its provisions and contingencies rose 77% at Rs.1899 crore and its provision coverage at the end of the quarter was at 55.27%, which in Q1 was at 54.67%. Capital adequacy ratio (as per Basel II) stood at 12.32% v/s 11.73% (YoY) and 12.44% (QoQ). Post the results of Bank of Baroda, the markets had been naïve to think that all bad loan problems of PSU banks had vanished but that was wishful thinking as at end of March 2013, there was $20 billion worth bad loans weighing on the banks. Stress on the asset quality and sharp fall in profit 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. SBI will declare its numbers on 13^th Nov.