Punjab National Bank (PNB) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Punjab National Bank Q2-FI27 earnings conference call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask

questions after the presentation concludes.

Should you need assistance during the conference call, please signal an operator by pressing star and then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Neten Agarwal. Thank you, and over to you, sir. Thanks, Agar.

Good evening, everyone. On behalf of Motilal Oswal, I welcome you all to this call to discuss the 2QFI27 results of Punjab National Bank. We have with us Mr. Ashok Chandraji, Managing Director and CEO, along with his top leadership team represented by Executive Directors, Mr. M. Paramasigam and Mr. Amit Kumar Shrivastav. To take us through the key highlights of the quarterly performance, I will now hand over the call to Mr. Sunil Kumar Goyal, Chief General Manager from the Strategic Management and Economic Advisory Division, to take things forward. Over to you, Mr. Goyal.

Good evening. Now I am sticking up with a disclaimer.

Statements made during this call may contain certain forward-looking statements apart from historical information. These forward-looking statements involve a number of risks, uncertainties, and other sectors that could cause actual results to differ materially from those suggested by the forward-looking statements. Punjab National Bank undertakes no obligation to update forward-looking statements to reflect events or circumstances after the present date.

Now I request M.B. Sir for his opening remark.

Good evening, ladies and gentlemen. First of all, I would like to touch upon the state of Indian economy. Indian economy continues to demonstrate a strong underlying growth momentum, supported by resilient domestic demand, infrastructure investment, expanding services activity, and a steadily strengthening financial system. India recorded real GDP growth of 7.8% in the first quarter of 2627, compared with 6.9% in the corresponding quarter of the previous year. Recently, MPC in its meeting and World Bank in its India Development Report had also revised the GDP estimates for financial year 2627 to 7.1% from the previous estimates of 6.7% and 6.6% respectively. On the external front, India's merchandise exports grew by 17.85% YUI during the period April to August 2026, reaching an estimated USD 215.91 billion. The banking sector, categorized by historically low levels of stressed assets and strong profitability, is well positioned to play a pivotal role in supporting and sustaining India's economic expansion. Coming to Punjab National Bank, we sustain a strong business momentum in Q2, marked by a decisive improvement in margins in line with our expectations. Continued strengthening of asset quality and enhanced operating efficiency. Our performance reflects the strength of our franchise and disciplined execution of strategic priorities. We remain firmly on track to deliver our FY2627 guidance. Our focus on retail, agriculture, and MSME continues to guide our efforts towards building a diversified and resilient, advanced book. At the beginning of the financial year, we have targeted to open 250 branches in this financial year, with particular emphasis on strengthening our footprint in the southern and western regions. We have already opened 162 branches out of which 119 are in the southern and western regions. In parallel, we are accelerating our digital transformation to build a more agile, efficient, and customer-centric organization. Our investments in technology, process automation, and data analytics are aimed at simplifying banking journeys, improving service delivery, and enhancing productivity, while positioning the bank to scale efficiency in a rapidly evolving banking environment. With this context, let me now turn to the segment-wise performance and key developments during the quarter. First, I will touch on the overall business growth, reached to 31.18 lakh crore, registering a robust YOY growth of 11.9%. Our advances grew by 14.7% YOY to Rs. 13.41 lakh crore, despite reducing IVPC exposure by 23,700 crore. Excluding this impact, Core Advantage registered a robust YUI growth of 17.4%, reflecting healthy credit demand and strong underlying business momentum. Our Core RAM portfolio continued to deliver healthy growth with retail advances, excluding IVPC growing by 16.3%, MSME by 19.8%, and agriculture by 18.1% YUI, reflecting broad-based traction across key segments. Credit growth is well-positioned to maintain its strong momentum, supported by a robust sanction pipeline. Bank sanctioned Rs. 4 lakh crore in 25-26 in corporate credit lines. Further, in the first half of this year, we have already crossed more than 2.5 lakh crore of sanctions in the corporate credit. Our pipeline credit is to the tune of 1.5 lakh crore, which provides a strong visibility for future credit growth. Global deposits of the bank We have reached to 17.77 lakh crore, with YUI growth of 9.9%. Our CASA strategy is centered on depending customer engagements and enhancing individual saving account balance, which grew by 8.1% YUI. In the beginning of the STNR campaign, we had targeted to raise 2.5 billion USD, and we have raised 2.7 billion in a calibrated manner. The same has been utilized for shedding of our high-cost bulk deposits and CDs. With a CD ratio of 75.5%, we have adequately balanced headroom to support planned credit expansion. Accordingly, our deposit mobilization remains measured and strategic, with a clear emphasis on optimizing the cost of funds rather than pursuing volume at any cost. I will test upon the profitability. Improving profitability remains the bank's foremost strategic priority, as consistently emphasized across various forums. As indicated in our previous interaction, we had expected a sequential improvement in margins during 26-27. Our Q2 performance validates this assessment with a substantial improvement in margins during the quarter. Domestic NIM improved by claim basis points sequentially from 2.64% to 2.74%, while global NIM increased from 2.5% to 2.58%. We expect this positive trajectory to strengthen further in the coming quarters, supported by disciplined balance hit optimization. NII increased to 11,601 crore, registering YUI growth of 10.8% and sequential growth of 7.4%, surpassing our stated guidance of 7%. Operating profit is continuously above 7,500 crore mark from the last three quarters and stands at 7,532 crore for Q2 of this year. Core operating profit, excluding recompense from return of accounts and treasury gains, grew by 29.4% on YOY basis and 8% on QOQ basis. Core operating profit forms 79% of the total operating profit in Q2 of Q27, which was 64% in Q2 of FY26. Our fee-based income grew by 16% on YOY basis, reflecting continued progress in diversifying revenue sources. The bank recorded a net profit of 5,532 crore in Q2, with a YOY growth of 12.8%. The bank's overall earnings profile reflects a sustained focus on profitable growth and strengthening poor earnings. Efficiency ratios. Our return on assets has consistently remained above 1% mark and stands at 1.05% in Q2 of this year. Our return on equity stands at 17.32%. Our tangible book value per se stood at 111.94% as of September 30, 2026, registering a significant improvement over 95.92% as of September 30, 2025. Our cost-to-income ratio has demonstrated a consistent declining trend, improving to 50.45% in Q2 from 51.20% in Q2 of last year, reflecting our continued focus on operational efficiency and cost optimization. I will touch upon the asset quality. Asset quality continues to extension with the gross NPA ratio decline 2.55% as on September 30, 2026, from 3.45% as on 30, June 2026. The net NPA ratio has also improved to 0.25% as of September 30th, 2026, from 0.36% as of September 30th, 2025. This sustained improvement reflects our disciplined credit underwriting, robust monitoring, and focused recovery efforts, while keeping us fully on track to achieve our FY26-27 guidance on both GNPA and net NPA. We have not seen any material impact of geopolitical tensions on the bank's asset quality. Our slippages remain contained. SMA accounts are overall credit portfolio continues to perform well. Our SMA 0-1 of 2.50% of the overall loan book. Our PCR stands at 97.32%, which is well above our guidance of more than 96%. Total fresh slippages during the Q2 of this year is 2,395 crore, and our guidance for slippages ratio to remain below 0.9%. We are at 0.77%. Total recovery stood at 2,805 crore for Q2 of this year, and our recovery is 1.17 times of the slippages in Q2, reflecting our commitment towards improving asset quality. We have made additional floating provision of 125 crore on prudential basis, making our total floating provision of 2,560 crore. We will also touch upon the asset quality underwriting standards. From the 1st of July 2020 to 30th September 2026, almost 6.25 years, we have sanctioned around 15.97 lakh crore, out of which we have dispersed 14.09 lakh crore loans. And the outstanding in these loans is 9.60 lakh crore, which is close to 71.60% of our total outstanding loan book as on today. And NPA in this book is hardly 0.42% of the dispersed amount. Our capital advocacy is 17.95% as on 30th September, and compared to 17.19% as on 30th September 2025. Our CET1 capital stands at 14.44% against regulatory requirement of 8%. Tire 1 capital stands at 15.89% against regulatory requirement of 9.5% including CCB and Tire 2 capital stands at 2.06% as on Thursday, September 2026. More than 87.6% of the total externally rated advance above 25 crore are above A rated and more than 52.4% are triple rated which indicates our balance resistance from risk point of view. Our digital transformation is reshaping the bank into future-ready institutions, driving superior customer experience, operational efficiency, and sustainable growth. Our H-127, our digital sanction has crossed 41,500 crore, reflecting a strong momentum towards our ambition of adding one more crore during this financial year. On the transaction side, over 95% of the customer transactions are now digital, and there is 31% YUI increase in digital transactions. We have further strengthened our digital payment offering by enabling UPI services for our current account customers through Plexi product PNB1 business mobile app. There is good traction in the PNB1 business app, and this app caters to more than 4.14 lakh customers with more than 225 teachers. We remain at the forefront of supporting RBI and government-led initiative in CBDC and digital public infrastructure. Going forward, we are expanding the application of AI and machine learning across operations, advanced analytics, risk management, and decision-making. Anchored in responsible AI practices, robust governance, and regulated compliance, this initiative will further enhance the bank's agility, productivity, and customer-centricity. PNB is taking a step towards becoming quantum-ready. We have deployed quantum-safe encryption in 256 of our customer-facing applications based on framework provided by NIST U.S. We are pioneering quantum technologies in banking through our quantum finance innovation hub at Amaravati, Andhra Pradesh, to advance cybersecurity, fraud detection, and secure digital financial services to extension the bank's technological resilience and future readiness. Now, I will touch upon the most important aspect, that is the human resource. We are investing in targeted capability building through customized certification program in collaboration with IIBF. Bank has launched a large-scale artificial intelligence enablement program, which has trained 47,544 officers of the bank. These initiatives have equipped our workforce with future-ready skills and enhancing technology adoption across the bank, and the bank has received Golden Peacock National Training Award for the initiatives such as PNB S-Pulse, offering telecommunication support for mental well-being, regular health check-ups and wellness sessions, and child care facilities, including credit services. We are fostering a supportive and inclusive workplace that prioritizes, implies physical, mental, and family well-being. Our Pan-India initiatives such as TNB Kheluso and PNB Taltaran provides platforms for employees to showcase their sporting and cultural talents, fostering a sense of belonging, and promoting a vibrant organizational structure. The bank is sharpening its focus on strengthening its savings, individual franchise, and drive, calibrated growth in the retail, agri, and MSME segments to enhance margins, optimize the cost of funds, improve business mix, and deliver sustainable growth in the earnings and returns ratio. Our robust risk management framework, anchored in prudent underwriting, disciplined credit monitoring, and focused recovery is strengthening asset quality and containing credit cost. Services and supplies and finance are emerging as key drivers of diversified fee-based revenue growth, introduction of wealth management services, and the comprehensive revamp of trade finance models aimed at enhancing customer value, strengthening service delivery, and improving non-interest income. Anchored in a strong balance sheet, discipline, execution, and diversified growth drivers, the bank is well positioned to drive sustainable profitability, strengthening return ratios, and deliver consistent long-term values to stay open for any questions or any clarification related with the financial performance of our bank of Q2, financial year 26-27.

Thank you very much. We will now begin with a question and answer session. Anyone who wishes to ask a question may press star and then 1 on their touchstone phone. If you wish to remove yourself from the question queue, you may press star and then 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Again, to register for a question, please press star and then 1. Your first question comes from the line of Kunal Shah with Citi. Please go ahead.

Yeah. Hi, sir. Congratulations for a good set of numbers. So, firstly, on the utilization of FCNR side, if you can just highlight in terms of how we have utilized it, was it more towards the repayment of the budget deposits as well as maybe repayment of some of the low-wielding corporate advances as there is no inch-up on the – either on the investments or on the cash side. So, how much of FCNR is, how it is utilized, that would really be helpful, yeah.

Yeah, thank you, Kunaljit. We raised 2.7 billion USD, and whatever amount we have mobilized, to that extent, our high-cost deposit in the bulk segment and the CD, we have already said now. So, we have practically utilized the entire amount now.

Okay, so it is just replaced, and that's the reason we are seeing the decline in the cost of deposits. Absolutely, absolutely right. Because last time you mentioned, like, larger part of the reprising is already done. So, I think entire benefit would have been because of the reprising. So, now, how much is the bulk deposit or the high cost deposit in the overall deposit base now?

It is around 17%, both, bulk deposit plus CD put together.

And this was last quarter? It was around 19%.

So, around 23,000, see, it is already there in the public domain also. We had the CD of around 60,000 crores, and we have brought it down to 40,000 crores.

Okay, okay. So overall now in terms of margin, so yield also appeared to have improved, so that is largely because of the repayment of the low cost, maybe the corporate advances or anything much during this, almost like 8 basis points increase in the yield on advances, yeah.

Domestic yield has gone by 10 basis points, 2.64 to 2.34. And if you recall my last conversation also, I had indicated that bank is working on the rebalancing of our balance sheet towards the credit portfolio. That is one of the reasons you are seeing the growth in the advances side. We are growing at around 13% to 14%. We are setting the low-cost, low-yielding advances, and to that extent, we are mobilizing the good portfolio now. I think coming quarters also, you will see these things are happening, and I think there will be improvement in the name further.

Sir, how should margins pan out? We are very comfortable to get into the guidance of 2.6 to 2.7, given that we are already at 2.5 right now.

Yes, yes. I think in this quarter also, we are expecting that with the strategy which we have put in place, there will be some good improvement, and now 25 basis point, the repo rate hike which has happened, I think that's also going to add. I was expecting around 7 to 9 basis point additions should further happen in this particular quarter.

So our reset of this entire repo linked booth, 53 odd percent, that would happen say quarterly or how is it?

No, no, it is very same day, means the next working day. So, the day it gets announced, whether it is increased or decreased, as per the policy, we need to pass it on to those things in the very next working day. So, already that we have done it, and 56% of our book is into the…

So, 25 basis points of 56, that should clearly reflect in terms of yielding the next quarter itself. Absolutely. Almost like 10, 12 business points impact would be there.

Minimum, minimum 7 business point overall impact will be there in the NIM side.

Sorry, didn't get the overall 7 business points, sorry?

7 business point improvement, minimum it should happen in the NIM side.

Okay, on NIM, it should be 7, and on Yield, it will be more than 10. Yield will be, yes. Okay, okay. Got it. And one last question on the corporate side. After a long, we saw some slippage. Anything to read into that? Maybe it's a smaller amount, but maybe what that pertains to almost like 300 odd crores, and that's leading to slightly higher slippages quarter on quarter. And any worry-worry which we would see on the MSME or the corporate or maybe any of the retail portfolio given the Middle East conflict which is there, yeah.

No, there is no impact of the Middle East crisis or the geopolitical tensions. I think it is one-off case and for a very long time we have seen any corporate loan is slipping to NPA. I don't think any other stress is there in the system now.

And this is domestic. It is domestic. It is domestic. Okay.

Thank you. The next question comes from the line of Chanchal, an individual investor. Please go ahead.

Hello.

Yeah, please.

Come out. Yeah. So, my question was basically on the right side. I say this quarter, the provision are only 597.00, right? Despite And from where does this 2,000 crore of write-back comes, you know, one-time, you know, and you relate to 50 crore parts to your routine requirements?

See, 125 crore we have kept as a floating provision. And there was a write-back to the extent of around 148 crore. Write-back of provision is there. And we have made some additional provision also to keep the provision coverage ratio intact. All put together, it is 817 crore provision we have made in the NPA book now.

Okay, my question was basically on the right back.

Is there any right back of close to 2000 crore? It seems like it's there. No, no, right back of 2000 is not there.

Okay. Okay. I think the other question of seafood was already answered. And I also see there is a seafood increase in agriculture sector, right? As of now,

stress is not there, but yes, you are right. I think we need to be very careful, and our team is working on that. The large-scale connection program with the farmers that we have organized now in all the geography, wherever the agriculture loans is there. So, we need to be very watchful, we need to have very close licensing with our forwards, and I think we will be able to navigate this.

And talking to my last question, you know, on your recovery, right, it seems that we are able to reach 5,600 crores. You know, we still have a target of, you know, as per guidance, more than 14,000 crores. So, we will be able to measure, how do you...

Yes. In fact, we were expecting in this quarter to have recovery in the range of around 3,000 to 3,500 crores. But recovery always happens sometimes. You initiate the process next month or next quarter. So I am expecting that at least in this quarter, the recovery should happen in the range of around 3,500 crores. So, we will be trying to reach that figure, around 13,000 crore of figure. But, of course, it is a challenging figure. Somewhere around 12 to 13,000 crore definitely will be there.

Thank you so much, and congratulations for the best call.

Thank you so much.

Thank you. Ladies and gentlemen, to ask a question, please press star and then 1. Once again, to register for a question, you may press star and then 1. Your next question comes from the line of Ankit Bansal with AB Investment Limited. Please go ahead.

Yeah, please go ahead.

Ankit. Sir, okay, sir. The question of slippages on the corporate loan. Sir, can you tell me from which sector that has been?

It is a road sector.

Roadways and infrastructure?

Infrastructure, yeah.

Okay, sir. What initiatives are you seeing that can affect the environment of banking that an investor can be careful of?

I can tell you that we are in the best of position, not only from the PNB angle I am talking about, for the entire banking industry I am talking. See, when the economy is growing at 7.8%, and not only the Indian data it shows, even the World Bank report and the IMF has also confirmed that in 26-27, the GDP growth will be around 7.1%. If that growth is going to happen, and if the nominal GDP will be around 11%, it means that much opportunity is going to come in the country now. And we always say that if 7.7% plus is the real GDP and around 11% is the nominal GDP, it means around 13% to 14% credit growth should happen in the country, and it is happening. It is getting reflected. I will tell you that for the last one and a half years, we are talking that, and really, it is a geopolitical crisis is there. Earlier, two years back, the Russia-Ukraine challenges were there, and now the Middle East crisis is there. So globally, a lot of challenges are happening, and that is one of the reasons you see all the countries in the global, they are at the GDP growth of around 3-3.1%, whereas the country India is growing at this speed. I am expecting that, and all the latest data also shows that all the retail, agri, MSME, a lot of opportunities are going to come. And it is for every institution, financial institution, to participate and take the cake from the bigger size which is available in the country now. So what I expect is momentum is going to continue. Q3 anyway, in every financial year, it becomes a very busy season for the bankers. That is the best decision for everybody now. I am expecting that further 1% or 2% growth should happen in the credit side. And since the repo hike is also there, so there will be momentum and there will be growth in the NIM and the NII also. All put together, a lot of opportunities are there in the system now.

Sir, have you used that 900 crore provision that you got right back?

900 crore, which one particular account you are talking about?

Yes, yes, yes. That you have not utilized from the quarters, no? Yes, yes.

We have utilized in this quarter, and you must have seen in the note also, we have mentioned that 1,150 crore, we have made a provision in the standard provision now. We have kept extra provision just at the time of migration in the ECS.

You have not utilized yet?

We have kept it as a provision in the standard account.

Okay. Okay. Thank you, sir. Thank you very much. Thank you.

Thank you. The next question comes from the line of Samir Bisse with Diamond Asia. Please go ahead.

Thank you very much for the opportunity and congrats on the strong quarter, sir. I don't know if this is covered earlier. Can you comment on the cost of fund side or cost of deposit side and how do you see the trajectory shaping up incrementally? That's my first question, and then I'll come to second.

So, cost September 25, our domestic cost of deposit was 5.18%, which we have brought it down to 4.97%. June 26, it was 5.02%. So, every quarter that is coming down, it means the incremental deposit which we are garnering, we are very mindful of the cost of deposit there now. And we have kept it at a very, very nominal growth, which we are investsizing, and consistently we are keeping it at between 8% to 9%. And this quarter, because of the S&R deposit, it has gone to 9.9%. Otherwise, consistently we are going to keep it between 8% to 9%. Cost of fund also, we are well within that parameter. And if you see the data, domestic cost of fund was 4.5%, 57%, and today we are at 4.34%. Even the global cost of deposit also, it has reduced from 5.18% to 4.96%. And global cost of fund also from 4.58% to 4.35%. So, a lot of improvements have happened, and we are very, very mindful of garnering any high-cost deposits. In this entire financial year, I am not talking about only Q2. If you see in the Q1 and Q2 put together, absolutely we have totally came down from the CD business. We have not gone for the mobilization of the CD now. So, bank is putting a lot of focus on the profitability. And in our every review of the Jones and the Circle, this is the top worst priority. We start with the review of these parameters only. And that is the reason in one quarter itself, you are seeing the 10 basis point improvement has happened in the domestic NIM now.

Sir, I appreciate the excellent execution. Wanted to understand how should one think going ahead, given the way rates are moving?

Going forward also, we are not going to increase the deposit rate. First of all, I want to clarify that because enough liquidity is there, And having 75% CTE ratio, I think we are well-placed to grow in the credit side to the extent of around 77-78% with the present deposit growth now. That is one thing. And second, from the credit side also, a lot of churning we have done in this particular quarter. And in my remarks also, I have mentioned that 58,000 crore of low-yielding advances we have said. See, in this last six months, we have sanctioned 2,500,000 of corporate loan borrow. We could have grown 17, 18% in the corporate loan borrow. But what we have done now, we have replaced those advances while we are sanctioning at a good rate with the low-yielding advances. And that, the entire activity, I'm going to continue in the Q3 and Q4. I think you will find from all the profitability angles, bank will be well poised after this end of this financial year.

So second question, slightly more medium term. Now, you have also indicated that obviously the recovery number you will achieve, I'm sure, but it is a bit of an uphill task. Next year when we have slightly lower recoveries and probably credit costs start normalizing, how should one think of ROE for next year? Will we still be able to deliver at least 14-15% ROE on tangible equity? Is that a fair assumption to make?

Absolutely fair. And I will share some data to you. If you see our core operating profit, the core operating profit is growing at more than 29%. Last quarter also, the core operating profit had grown by 35%. And core operating profit, you know, that it is excluding that technical right of recovery and the treasury recovery. If that is picking up so well, and there is a consistency is there in that. If you see, the June quarter, our total core operating profit was 5531 crore. And in this quarter, it is 5971 crore. This anyway, it is going to continue. It is not going to come down. Further, the activity with the bank has started, and when we are putting a lot of focus on the high-yielding advances, I think this core operating profit will further go up. And that will be the strength of our bank as far as the profitability is concerned now.

The activity will be... Sir, even if there is some bit of ECL inch up and lower, say, recoveries and lower trading profits, at least that number should be protected.

It's going to be no impact on our book now.

We have done the ECL calculation. Last time I had told that we will have the digital calculation also in place in the month of October. And we have those calculations. What we had in this case earlier that it will be around 9,000 to 10,000. Roughly, it is going to come to around 8,000 crore now on the loan book. No, sir, on an ongoing basis, the run rate credit. On ongoing basis also, see, the credit underwriting, why the ECL has come down to the extent of around 8,000 crore, it is because of the underwriting standard of the bank which has improved now. And I mentioned in my opening remarks, the last six and a half years, the bank which has sanctioned and dispersed, our NPA percentage is only 0.42%. So to that extent, our provisioning requirement is going to come down. And I am factoring that also in my credit cost to the extent of around 15 basis points. With that, our credit cost will still, it will remain between 0.25. We are very mindful to provide the ROA of more than 1.0405, 15 to 17%. Minimum, it will be there.

Thank you, and all the best.

Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, we request you to limit to two questions each and rejoin the queue for any further questions. The next question comes from the line of Jayant Karote with Access Capital. Please go ahead.

Thank you for the opportunity. Sir, just clarifying on the previous, you said you are expecting a 15 basis points, in fact, on a steady-state basis from the ECL next year. And with that, where do you expect your credit cost to be running at?

Around 0.25 to 0.30.

0.2 to 0.3. So, sir, just, you know, if I take your second quarter, you are literally at a zero credit cost and you've done an ROI of 1.09. So, that 15 basis points means you have to compensate on the NIMS by then, by at least that much. Or there are other line items where you have identified that that should compensate for the 15 basis points in your P&L.

See, when present also, our credit cost is 0.25%. And still I am committing that with the ECL provision also, we will be able to maintain this. See, this 0.25% also, which is the additional provisions which we have made it in the system. This quarter also we have made extra provision in the NPA account itself, we have made extra provision of around 700 crore. Otherwise, there was a write-back provision was there to the extent of 146 crore. So, to keep the provision coverage ratio at around 97% and net NPA under control, we have made this additional provision. We have also made 125 crore extra floating provision in this quarter. With all those things, the credit cost is 0.25%. So, that is already the factor, and in fact, we are doing it every quarter.

Sir, and what is the total outstanding standard provisions which you can use against that 8,000 crore to offset?

That is 1,150 crore this quarter we have made in the standard account. We have kept it now. And 2,560 crore, we have kept it in the NPA account as an ECL provision, extra provision. So, these two things put together, substantially, it will reduce my burden on the ECL migration.

And you might also make some for the next two quarters to make sure the transition is smooth. The second question is on the cost of deposits at system level. We are seeing CD rates have hardened. Your SAAR growth this quarter is like 2%, 1.5%, 2%. While I understand you are willing to take the CD ratio up, but every time you press the pedal on deposit growth, it's going to be NIM dilutive unless the asset mix is meaningfully different. How do you address the structural problems, sir? So the SAAR growth doesn't seem to be moving up.

There are two components. One is the SB individual and another is the SB institutional. SB institutional, it is there for all the banking industry. It is coming down because of the government deposits moving to just-in-time deposit to RBI. So going forward also, there will be decline in the SB institutional. What we are putting focus on the current account and SB individual. SV individual, we are growing at more than 8.5%. In this quarter also, we have grown at 8.36%. Last quarter, it was at 9.1%. So, a lot of activities we are doing it in the SV individual and the current account. Current account, there has been a good growth, and it was more than 10.76% growth was there in the current account. Almost 12% growth is there. So, going forward, bank will put a lot of emphasis on mobilization of these deposits. Along with that, we are also mindful of mobilizing the retail top deposit, which comes at a reasonable price. So, incremental cost of deposit, bank is putting a lot of focus, and we are not in the CD business at all. We are also not aggressive at all in the bulk deposit. We are quite comfortable at this point of time to grow the credit around 77-78 with the present deposit flow set.

And your previous comment that you will not take hikes on deposits was about bulk, not retail. Retail TD, you are willing to take hikes to get that growth?

We are not going to change any rate in this particular month now. So, we will be still holding on because we are able to mobilise deposit. Every day we are monitoring it and we are able to garner the deposit in the retained term deposit and SB individual.

And last data keeping question, sir, in the SA book, how much is individual SA and government SA split broadly?

I will tell you, the adjunct figure, I will tell you. See, the total saving deposit is 5,42,900 crore. 5,42,900 crore. In that, SB individual is 4,82,700 crore. And institutional is only around 60,100 crore.

And you are saying it's the institutional that is de-growing and individual is growing 8.5%.

Yeah, individual has grown by 8.5%, and institutional has degrown by 3.84%, and that is the reason overall CASA, it comes down, and CASA growth is only 7.33%.

Thank you, sir, and again, congrats on the excellent performance on the NIMS that we have been heading since two quarters. Congrats.

Thank you. The next question comes from Bhavik Shah with Goldman Sachs. Please go ahead.

Hi, sir. Thanks for the opportunity. Sir, what is the LCR ratio for the quarter? 133%. Okay. And sir, how much of the FNRB was self-funded?

Funded, it was around 30%. 70% was the leverage, 30% was self-funded.

Okay. Understood, sir. And sir, how should we think about your recovery from Rittenhoof? So, I understand 13,000 crores is the overall recovery that you have seen. So, of that…

Yeah, 900 to 1,000 crores, I am expecting recovery should happen in the next two quarters.

Okay. And as in how so confident are you to sustain this pace over the next two years?

Definitely. Recovery will go… it will come down in the coming years now. I think next year, we will be keeping the target at around 12,000 crores of total recovery. So what we are doing it, in fact, in the last Concon also I had mentioned, keeping in mind that recovery in the next two, three years will come down, and going forward also it will come down, because now the slippages are coming down. So raw material is coming down, so definitely it will be, recovery also will come down. So what we have done now, the credit card accelerated, supply chain vertical, which we have started, headed by a general manager, and the third is the cash management services. These three activities last year, first we put the digital platform in place. It took five, six months to put in place, and then November onwards, we have started this activity. And all these three activities have picked up very well in this financial year. And that is the reason fee-based income of our bank, if you see, it is growing at more than 16% value-wise. So, and this year, we have started another two activities. One is the wealth management services. I think from January onwards, that vertical will be in place. And another activity which we have accelerated is the trade finance model. We are putting it in the full entire thing on the new digital stack. And another two months' time, that journey will be through the mobile app and the digital facility. So, these five activities put together will navigate our profitability point of view when the recovery is coming down.

And so, lastly, sir, in the treasury gains, is there any lumpy one-off gain during the quarter?

No, no, nothing.

Nothing from NSC or anything?

NSC, we had a small amount, so MTM was there in that, but very small amount.

Thank you, sir.

Thank you. Your next question comes from the line of Jai Prakash Mundra with ICICI Securities. Please go ahead.

Yeah. Hi. Good evening, sir, and congratulations on a good quarter. Sir, I have a few questions. First on a clarification, first on ECL, right? So you mentioned that what the transition impact is needed is 8,000 crores. And we have already done 2,560 plus 1,150, right? So around 3,700 we have done and 4,300 crores is spending. Is that understanding correct? Or 8,000 is still needed?

No, no, no, no. We will be requiring only around 5,000 crores.

Okay. And sir, this is only related to loans, right? There may be ECL impact because of the HTM hardening. Have you taken that or that is outside of this remaining 5,000?

That is outside. This book, this is what I am talking about is only the loan book. And yeah, rest, still the discussions are going on with RBI. And we will see how it comes out.

Right, right. So, sir, in the notes to account, we have also mentioned that, you know, because the IFR reserves is no longer needed, some 4,000 crores have been added back. Could this be utilized towards, let us say, ECL transition or the HTM, if you were to do HTM on, MTM on HTM books?

Yeah, we will see that because if it is going to happen for the STM transition, then I think that amount will be required for that. We'll use that.

And, sir, on your asset quality, one is if you're given the SMA 1 plus 2 number is at 2.5%, which I believe has improved even from Q1, which was, I think, 2.9% something. You have the number, sir, separately, 1 and SMA 1, 2 and 0 also.

SMA 0 is 16,963 crore. SMA 1, 7,463 crore. And SMA 2, 8,984 crore. All put together, it is 33,410 crore. It comes to 2.49.

All right. Okay. And sir, in the area, I think a few districts have been declared drought hit. Have you done any rough calculations, sir, if those would require restructuring, that is number one, or you are seeing a delayed recovery in those districts or states, any preliminary assessment there?

Now, as of now, see, if you see my SMS 012 book also, those challenges are not visible. But you are absolutely right. We are very mindful of that. Those things may happen in the next two, three months' time. So what we have done now, we have accelerated the activity in the field, connecting with the borrowers, especially in the agriculture segment. A lot of activities in the field level we are doing it to have a very close monitoring. Our monitoring department headed by a CGM is looking into entire aspect. And as in today, when I am talking to you, still the things are fully under control. There is no alarm battle to be put down.

But, sir, do you suspect any restructuring window to be opened or that has already been decided by SLBC?

No, no. There are, I think, one or two states, they have decided some two, three months back. But on the large scale, we need to wait for some time now. And once the SLBC decides and the local government and the SLBC decides, then there is a proper framework there as per the RBA guidelines. We need to restructure those things and all those things will do that. But I just hope no such things have started happening. Right.

Okay. And, sir, sorry, just to come back on yields, do you have the movement of AFS reserves? I think because, or the, so AFS reserves for Q1 and at the end of Q2, and this loss of, loss profit of revaluation of investment, which is only 32 crores, if you were to strip off NSC, MTN, then how much would that be if you can go in the numbers?

Yes, yes. AFS reserve, I think you can, my CFO is there, he will make a comment.

AFS reserve in this quarter was minus one.

Last quarter it was positive.

Last quarter it was positive. 445 was positive.

Sure. Sure.

Yeah.

And lastly, sir, this gold loan and the progress, sir, I think we, like you mentioned on CMS and other things. So, I wanted to check on gold loan. What is the quantum? How are we doing?

It is growing at almost 97-98% of YUI. Yes. So, September 25, the figure was 18,300 crore. And now we are at 36,000 crore now.

Okay. And sir, you have the breaker between agree and non-agree of the gold?

It is 93-94% is agree.

Okay. And the similar thing, sir, for PL and credit cards, sir, now I think credit card has it reached decent size and PL also, personally.

It has started picking very well now. And today we are at around 11 lakh credit card. See, it was 6 lakh on March 25. And March 26th, it was 8 lakhs. Today, we are at 11 lakhs now. And this area, we are going in a big way now. So, you remember, we had launched a P&B luxury credit card. And now that number has also lost us almost a 27,000 number now. So this activity, the bank is putting a lot of focus, a lot of higher performance offers we have brought in now. I'm expecting that from next financial year, this particular activity itself will contribute around 200 crore of income, fee-based income to the bank. Similarly, the supply chain where the dealer and vendor financing which we had started, they are also outstanding book under that supply chain is around 4,000 crore now. Sanction itself is more than 7,600 crores, and outage trending is 5,000 crores now. Similarly, the cash management services which we have started, I think all those areas, the bank has started putting a lot of focus, and that is the reason, if you see, last time also we had a discussion that pre-operating the core operating profit now, excluding the treasury and the recovery, TWA recovery. Now, that is growing at 29%. In this quarter, also, growth is 29%. Last quarter, also, it was 35% YUI growth. So, I think this is one area which is going to bring stability in our profitability.

Very well said, sir. Thank you so much and all the very best.

Thank you. Thank you, Muzal.

Thank you. Your next question comes from the line of Param Subramanian with Investec. Please go ahead.

Hi, sir. Congrats on the quarter. Thanks for taking my question. So, my question is on the provisioning for the quarter. Sir, the provisioning is only 97 crore, while you have shown the NPA provision is 817 crore. So, what is the balance, sir, which is the negative number?

See, 817 crore constitute the provision which have been made as a floating provision, 125 crore for ECL, and the remaining additional provision we have made in our NPA accounts to keep the provision coverage ratio at 97%.

No, I got that, sir. I mean, but the P&L provision is only 97 crore. So, despite having 817 crore NPA provision in the quarter, so this means there is a write back of provision from somewhere else, that is what I am going to understand, how much is it?

Yes, yes, yes. I think 720 crore. 798. 798. 798 crore write back is there.

So, this is coming from where?

That one account was there a particular account, there the write back of provision has happened.

Okay.

Okay, NPA account is it?

Standard account or? It is a standard account. Okay, okay sir. And so, in the you know when you were speaking initially, you said the SMA book 012 is 2.5 percent and that is including all ticket sizes is it? If you could kindly break that up into SMA 01 and 02, if that is available.

SMA 0, shall I give you the percentage number or you want absolute number?

Sir, this is our base. It's convenient.

SMA 0 is 1.26%. SMA 1 is 0.56% and SMA 2 is 0.67%. All three put together is 2.49%.

Okay, sir. Perfect. That's all I wanted to ask. Thank you so much and congrats on the call. Thank you.

Thank you. The next question comes from the line of Ashlej with Kotec Securities. Please go ahead.

Sir, just a few questions from my side. What is the retirement related provision that you have made in the employee expenses line during this quarter?

I think 394, 345. 345 crore we have had.

Sir, what was the corresponding number last quarter?

Q1, it was 440 crore. 490 crore was there in Q1. And this quarter, we have made the 340 crore.

Understood.

Sir, and if you can share, what is the average yield you have on the gold loan book?

It is around 8.6%.

Okay, so you think this golden pricing, which is closer to the bottom end of the industry, do you think there is scope to increase it from this level?

The portfolio you are talking.

Yeah, so when we look at the pricing offered by peers on the golden portfolio, it varies between this level of, let's say, 8.5%, 9% to as high as, let's say, 20% for some NBFCs.

Yeah.

Do you think you can take this 8.6% number, let's say, closer to 9 or 9.5?

We are, I think, there will be some increase will happen now. So, somewhere, I think, 8.75 to 8.9% will take it now.

But that would be led by the report rate increase, or you think beyond that also you can increase the spread?

No, report rate will do that.

Okay, understood, sir. Sir, and just one last clarification, there used to be this 1200 to 1300 crores of provision from the islandFS recovery, which was available. Has that been fully returned back now?

We have done now, and that is the reason we have made additional provision in the standard account now, as a part for keeping the ECL provisioning now. So, 1150 crore additional provision we have kept now in the standard account.

Perfect, sir. Thank you. Those were all the questions I had.

Thank you. Thank you. The next question comes from Sushil CTOC with Indus Equity Advisors. Please go ahead.

Good evening. Congratulations to Team PMB for excellent result. Good evening, sir. My question was more pertaining to growth outlook rather than the past numbers.

Yeah.

Do we anticipate based on what is credit pipeline, the current Indian economy situation, demand coming from infra, new sectors are emerging, whether it is GPU trade, financing for data centers, power transmission, that you will out beat the system by a few higher basis points and even higher than your estimates?

In fact, absolutely, you're right. A lot of activities are happening, and that is the reason last year our corporate credit sanction was 4 lakh crore, and this year, already within six months' time, we have crossed 2 lakh 50,000 crore of sanction. It is not the pipeline. It is the sanction we have given now, and still 1 lakh 57,000 crore of disbursements are going to happen of the previous year sanction and this year sanctions now. And all those areas which you have mentioned, in fact, these are the emerging areas where the bank is putting a lot of focus now. So whether it is infrapower, renewal, in fact, renewal energy is the champion sector we have identified. And we are taking a good proposal center this particular segment. Road anyway, it is happening. Petroleum and natural gas, even the chemical fertilizer, real estate, data center, And the food processing, we are getting some good proposal. EPC, anyway, it is there. REIT, INVIT, all those sectors, in fact, a diversified field bank is taking the exposure now. And actually, our corporate loan book should have grown by 17, 18 percent plus. But what we are doing it, and that is the impact you are seeing on our name now, That there were some low-wielding advances, which we are supplementing it with this new advances, which we are doing it at a higher price now. And this, we are going to continue in this quarter and the next quarter also. So, have the full, the setting of our low-wielding advances, and maybe from 27-28 financial year, I think the profitability will be, absolutely there will not be any challenge.

How do you see your balance between RAM and Corporate Book by the year and based on the current prospects?

I am expecting that somewhere around 58-59% by end of this year will be there.

58-59 on RAM and balance on Corporate?

Balance Corporate, yeah.

Then you are out beating all your peers from a perspective of Corporate Book is concerned.

Yes, I think you are right. Many corporates, they are still at around 40-41% now.

And what kind of CG ratio do you expect?

See, I am not averse to the corporate loan book. If I am able to get at the same return from the corporate loan book, we should be very reasonable in the corporate loan book growth also as well as the RAM growth also. So, basically, our strategy is that wherever we are able to get the pricing which we have set for ourselves, that there is a return which we should get out of any proposal, whether it comes from the corporate or the mid-corporate or from the RAM, we are able to do that and we will be doing it. But with that, still we will be holding that around 58-59% RAM contribution should be there in the overall credit.

Any view on M&A financing, GIFCB, and your international book?

Yeah, yeah, yeah. M&A, we are very shortly, we are going to have an MOU with one foreign bank, and I am expecting that one or two transitions should happen in this quarter. Even the GIF City… One path number? I think, give me some time. I will announce that. Let me have that clarity. Then GIF City branch also, a lot of activities we have started, even for the aircraft, engines, their maintenance, that funding also we have started there.

So aviation is one, any other sector where you are seeing, second thing is a lot of global houses and domestic Indian industry are opening day offices in GIF City because we escape all All the norms which the international guys enjoy through GiveCity, are we targeting some large numbers, businesses out of there for routing of finances and healthy balances to accrue in GiveCity?

We are planning now, we are planning. In fact, the M&A which we are going to sign with one foreign bank, I think that sort of arrangement we are going to do it in the GiveCity also. And you will see some good traction happening from the Q4 onwards.

Sir, a key question on this. If our ambition and PMB's prospects can be better than many peers, to emerge a winner, we need good talent on the sector, which traditionally public sector banks were not permitted. And we may need faster tax too for such transaction because M&A can't wait, and you may have alignment with foreign banks 1 or 10, that doesn't matter, but ultimately Indian humans have to work faster on the services and capability to even engage in certain transactions. How are we creating a team to accept this kind of business emerging?

We have created a separate department in the corporate credit. First, I will talk about the corporate credit. Different verticals are there headed by an industry expert in the infra, in the renewable energy, power sector, transmission. So, there are three, four important key verticals. Even the emerging areas, we have created a vertical. And that is the reason, in fact, we have gone for financing to the defense also, even for the hydrocarbon, I think another major activity which is happening in the country towards the drone and all. So all those areas, banks have started creating the pool and the expertise to do the funding. Second thing, the bank has put a lot of emphasis on the technology side, whether the artificial intelligence, AI, or the quantum. We have declared in the country now that we are going to have the center of excellence in these three areas, and that we will work not only for PNB, but for the entire financial community now. We are the, I think you must have heard that we are the only bank in the country who have started working on the quantum. And I have mentioned in my opening remarks also that 200 plus of our public-facing applications, we have deployed the quantum now that has been certified by the NIST USA. We have also created a quantum financial innovation lab in Amravati, along with the Andhra government partnership. And that lab is providing, they are working on three huge cases, not only for P&P, for the entire financial sector now. So, a lot of activities, a lot of talent, the churning, we are doing it. In-house, we have good talent. We have more than 150 good software technology people are there. I think you assign any job and within 48 hours, they can deliver the things now. That is the strategy and that is the talent pool Punjab National Bank is having now.

Sir, my last question… Sorry to interrupt. Social, sir, we request you to return the queue for…

No, no, please, please, let him, let him. This is the last question. Chokshi ji, please continue.

Sir, as all public sector banks have expedited the results earlier than most of the private sector banks, any view on consolidation which is a rumor in the market or the committee is being formed for consolidation,

I am also hearing from you.

Thank you for answering my question.

Thank you.

Good luck for the year. Yeah.

Thank you. Thank you so much.

Thank you. We will take the last question from the Lion of Sarket Kapoor from Kapoor Kampur.

Yeah.

Namaskar, sir. Namaskar.

Sir, thank you firstly for the opportunity, and sir, thank you for a very exhaustive discussion on the operational number and clarifying all our doubts. So, just to summarize, sir, H2 in all parameters looks to be a better quarter, a better half than what H1 was in terms of the operating performance, And with more impetus on improvement in NIMS because of the repo hike. So, this understanding is correct, sir, on the summary part?

Absolutely right. Absolutely right.

Okay.

Not only from the repo rate hike. In fact, I had mentioned in my last conversation also that since the internally bank has put a lot of focus on the profitability, so without repo also, you have seen the growth happening in the NIM and the NIL. 10 basis point domestic NIM has gone up without any repo impact. Now, repo impact which has come, that will add further fuel to increase the NIM now.

Okay. And sir, secondly, when we mentioned in our P&L statement, line number D, wherein we provide two line items, firstly about the provision other than tax and contingency, and then the second line is only for the non-performing assets. So, that number is only mentioned for our understanding. It does not have any calculative impact on generating the profit. So, can you explain the rationale, sir? Why is this 817 figure mentioned there, and it is not accounted for, if we take the profit and loss form? Yeah.

My CFO will give you the question.

817 crore, the figure is, that is computed for the purpose of the credit cost. So, if we are mentioning 817, that is the provision which has been accounted for, for computation of the credit cost, And 97, which has been arrived at, there are other provisions in the form of the, not only in the loans, but in the investments also. As sir has already mentioned in the earlier question, that there is a release of 790-year crore in one account, which was in the form of an investment. NPI provision has been released. So netting that, it comes to 97.

Okay, and the total, I mean, the net of all, I figure, the P&L is through the root of 97, but the total provision of non-performing asset is 870 crore. That is all. Thank you.

So, I am expecting that around 700 to 800 crore things should happen in this quarter also. Let us see that how the yield movement happens. So, maybe it is a transitory thing where the 7.41 G-Sec yield is there. But that rate will not continue for a long time.

That is correct. But when we look at the P&L part for Treasury income, our number for this quarter is 2193. That is quarter-on-quarter up only from 2182. So, what explains, you are mentioning that there is a negative impact. So, where is this accounted then, that 700 crore?

753 crore is the income of a Treasury income. Treasury income, yeah. Treasury income is 753 crore.

I am just referring to the P&L segment results, where in our Treasury operation say, And thank you once again, sir, for answering. Thank you.

Ladies and gentlemen, as there are no further questions, I now hand the conference back to the management for closing comments.

So, thank you very much to all the esteemed analysts and investors. I think the faith which you have reposed in our bank, it is our responsibility to continue this momentum. And definitely going forward, like every quarter, I mention that, that we will maintain the consistency in the growth, profitability, and asset quality improvement. I think that trend will continue, and we are all committed to the important stakeholders of the organization, and we need to deliver the best, the thing which is going to happen in the future now. Thank you very much.

Thank you. On behalf of Punjab National Bank, that concludes this conference. Thank you, everyone, for joining us, and you may now disconnect your lines. Thank you.