InvestorQ : I had recently bought shares of PNB? Please tell me what I should do after the latest results. Should I shift to another PSU bank?
shrinidhi Rajan made post

I had recently bought shares of PNB? Please tell me what I should do after the latest results. Should I shift to another PSU bank?

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Riya Dwivedi answered.
2 years ago
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Though Punjab National Bank (PNB) posted net profits of Rs.507 crore in the September quarter compared to a net loss of Rs.4532 quarter in the Sep-18 quarter, the finances of the bank are still under stress. This stress could only get accentuated considering that PNB is also going to acquire two public sector banks from the next financial year. It needs to be remembered that from April 1st 2020, PNB will take over United Bank and Oriental Bank of Commerce. PNB’s common equity tier (CET)-1 ratio rose sharply to 10.94% (of risk-weighted assets) at the end of Q2, from 6.35% in end of Q1. This was largely aided by the government infusing Rs.16,091 into its core equity capital.

However, there are also problems galore at PNB. The picture is not too to be rosy, looking at the bank’s balance sheet closely, as it hasn’t yet transited into a new corporate tax regime and has decided to defer some fraud-related provisioning. This could impact the profitability of the bank in the coming year. To get a picture of the numbers involved, PNB actually deferred provisioning to the tune of Rs.2,284 crore to subsequent quarters related to fraud accounts, taking benefits of a special dispensation provided by RBI. If this was factored in, it could have a deep impact on the profits. However, this will be an overhang in the coming years.

As of now, PNB still has too many question marks over its asset quality and you should look at a PSU bank with relatively better asset quality like BOB or SBI to ride the PSU banking wave in the Indian markets.

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