4QFY2013 Result Update | Banking

May 11, 2013

Punjab National Bank

Performance Highlights
Particulars (` cr) NII Pre-prov. profit PAT 4QFY13 3,779 2,852 1,131 3QFY13 3,733 2,682 1,306 % chg (qoq) 1.2 6.3 (13.4) 4QFY12 3,310 2,936 1,424 % chg (yoy) 14.2 (2.9) (20.6)

BUY
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Banking 27,311 1.1 992/659 90,405 10 20,122 6,107 PNBK.BO PNB@IN

`773 `945
12 Months

Source: Company, Angel Research

During 4QFY2013, PNB registered moderate operating performance (pre-provisioning profit de-grew by 2.9% yoy), which was on expected lines. However, on the asset quality front, the bank witnessed improvement, as its Gross NPA levels declined sequentially by 3.8%. The bank prudently increased its PCR (up by 286bp qoq) and hence provisioning expenses grew by 43.8% yoy and earnings declined by 20.6% yoy. Business growth muted, NIMs largely stable sequentially: During 4QFY2013, the bank witnessed moderate growth in its business, with advances and deposits registering a growth of 5.1% and 3.2% yoy, respectively. CASA deposits grew by 14.3% yoy, much higher than the growth of 3.2% yoy registered in overall deposits. Reported CASA ratio for the bank improved by 466bp yoy to 40.9%. During the quarter, the bank shed around `10,150cr of differential rate deposits (including CDs), thereby leading to substantial reduction in share of differential rate deposits (including CDs) from 15.3% in 3QFY2013 to 12.5% in 4QFY2013. NIM remained largely stable sequentially at 3.5%. Non-interest income (excluding treasury) de-grew by 23.2% yoy, due to a poor performance on the fee income front. During the quarter, the bank reported improvement in asset quality, as slippages ratio for the year FY2013 moderated to 2.94%, as compared to annualized slippage ratio of 3.48% recorded for 9MFY2013. Also, recoveries/upgrades as a proportion to opening advances remained stable at 1.0% for FY2013 as compared to 1.0% for 9MFY2013. Consequently, on an absolute basis, gross and Net NPAs improved by 3.8% and 4.6%, sequentially, respectively. PCR for the bank improved by 280bp qoq to 58.8%. Additionally, the bank restructured advances worth ~`6,444cr during the quarter, thereby taking its outstanding restructured book, to `32,143cr (of which ~38%, come from power sector). Outlook and valuation: The banks valuations are currently at a low of 0.7x FY2015 ABV compared to its eight year range of 1.01.6x and median of 1.4x. due to the asset quality concerns facing the sector. The bank structurally has lower cost of deposits than peers and has cyclically already experienced relatively higher asset quality pain than peers. With asset quality improvements and consolidation of balance sheet, we expect prospects to improve for the bank. Even valuation-wise, the stock is trading below the lower end of its historical range. Hence, we recommend Buy with a target price of `945. Key financials
Y/E March (` cr) NII % chg Net profit % chg NIM (%) EPS (`) P/E (x) P/ABV (x) RoA (%) RoE (%)
Source: Company, Angel Research

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 57.9 16.3 18.0 7.8

Abs. (%) Sensex PNB

3m 3.4 (10.1)

1yr 23.5 3.6

3yr 17.4 (24.0)

Vaibhav Agrawal
022 3935 7800 Ext: 6808 vaibhav.agrawal@angelbroking.com

FY2012 13,414 13.6 4,884 10.2 3.3 144.0 5.4 1.1 1.2 21.1

FY2013 14,857 10.8 4,748 (2.8) 3.3 134.3 5.8 1.0 1.0 16.5

FY2014E 16,625 11.9 5,363 13.0 3.3 151.7 5.1 0.8 1.0 16.1

FY2014E 19,283 16.0 6,256 16.6 3.4 177.0 4.4 0.7 1.1 16.5

Sourabh Taparia
022 3935 7800 Ext: 6872 Sourabh.taparia@angelbroking.com

Akshay Narang
022 3935 7800 Ext: 6829 akshay.narang@angelbroking.com

Harshal Patkar
022 3935 7800 Ext: 6847 harshal.patkar@angelbroking.com

Please refer to important disclosures at the end of this report

Punjab National Bank | 4QFY2013 Result Update

Exhibit 1: 4QFY2013 performance

Particulars (` cr) Interest earned - on Advances / Bills - on investments - on balance with RBI & others - on others Interest Expended Net Interest Income Other income Other income excl. treasury - Fee Income - Treasury Income incl. MF Div. - Recov. from written off a/cs - Others Operating income Operating expenses - Employee expenses - Other Opex Pre-provision Profit Provisions & contingencies - Provisions for NPAs - Other Provisions PBT Provision for Tax PAT Effective Tax Rate (%)
Source: Company, Angel Research

4QFY13 10,379 7,793 2,406 102 78 6,600 3,779 1,174 853 519 321 130 204 4,953 2,101 1,421 680 2,852 1,478 830 648 1,374 243 1,131 17.7

3QFY13 10,548 7,891 2,518 113 27 6,815 3,733 971 848 509 123 145 194 4,704 2,022 1,407 614 2,682 802 466 336 1,880 575 1,306 30.6

% chg (qoq) (1.6) (1.2) (4.5) (9.5) 191.0 (3.2) 1.2 21.0 0.7 2.0 161.0 (10.3) 5.4 5.3 3.9 1.0 10.6 6.3 84.3 78.1 93.0 (26.9) (57.7) (13.4) (1286)bp

4QFY12 9,680 7,495 2,127 50 8 6,370 3,310 1,276 1,111 608 165 241 262 4,586 1,650 1,007 643 2,936 1,027 939 88 1,909 485 1,424 25.4

% chg (yoy) 7.2 4.0 13.1 105.8 837.1 3.6 14.2 (8.0) (23.2) (14.6) 94.5 (46.1) (22.1) 8.0 27.4 41.2 5.7 (2.9) 43.8 (11.6) 633.4 (28.0) (49.8) (20.6) (770)bp

FY2013 41,893 31,867 9,517 325 184 27,037 14,857 4,216 3,496 2,169 720 422 905 19,072 8,165 5,675 2,490 10,907 4,386 3,336 941 6,522 1,774 4,748 27.2

FY2012 36,428 28,447 7,692 213 77 23,014 13,414 4,203 3,664 2,193 539 510 961 17,617 7,003 4,723 2,279 10,614 3,577 2,403 828 7,037 2,153 4,884 30.6

% chg (yoy) 15.0 12.0 23.7 52.9 140.5 17.5 10.8 0.3 (4.6) (1.1) 33.6 (17.3) (5.8) 8.3 16.6 20.1 9.3 2.8 22.6 38.8 13.6 (7.3) (17.6) (2.8) (339)bp

Exhibit 2: 4QFY2013 Actual vs Angel estimates

Particulars (` cr) Net interest income Other income Operating income Operating expenses Pre-prov. Profit Provisions & cont. PBT Prov. for taxes PAT
Source: Company, Angel Research

Actual 3,779 1,174 4,953 2,101 2,852 1,478 1,374 243 1,131

Estimates 3,848 1,158 5,006 2,066 2,940 784 2,156 839 1,317

Var. (%) (1.8) 1.4 (1.1) 1.7 (3.0) 88.6 (36.3) (71.0) (14.2)

May 11, 2013

Punjab National Bank | 4QFY2013 Result Update

Exhibit 3: 4QFY2013 performance analysis

Particulars Advances (` cr) Deposits (` cr) Credit-to-Deposit Ratio (%) Current deposits (` cr) Saving deposits (` cr) CASA deposits (` cr) Reported CASA ratio (%) CAR (%) Tier 1 CAR (%) Profitability Ratios (%) Cost of deposits Yield on advances Yield on investments Yield on funds Cost of funds Reported NIM Cost-to-income ratio Asset quality Gross NPAs (` cr) Gross NPAs (%) Net NPAs (` cr) Net NPAs (%) Provision Coverage Ratio (%) Slippage ratio (%) Credit cost (%)
Source: Company, Angel Research

4QFY13

3QFY13

% chg (qoq)

4QFY12

% chg (yoy) 5.1 3.2 145bp 4.9 16.9 14.3 466bp 9bp 48bp (18)bp (67)bp 22bp (17)bp (31)bp 1bp 645bp 54.4 134bp 62.5 83bp (390)bp (334)bp (18)bp

308,725 297,313 391,560 385,785 78.8 29,874 77.1 25,345

3.8 293,775 1.5 379,588 178bp 17.9 77.4 28,472

123,470 117,097 153,344 142,442 40.9 12.7 9.8 6.6 10.7 7.9 8.5 5.4 3.5 42.4 13,466 4.3 7,237 2.4 58.8 1.3 0.7 38.4 11.7 8.6 6.8 10.9 7.9 8.8 5.7 3.5 43.0 13,998 4.6 7,586 2.6 56.0 4.0 0.4

5.4 105,657 7.7 134,129 242bp 106bp 114bp (13)bp (17)bp 0bp (31)bp (28)bp 4bp (56)bp (3.8) (34)bp (4.6) (21)bp 286bp (272)bp 30bp 36.2 12.6 9.3 6.8 11.4 7.6 8.7 5.7 3.5 36.0 8,720 2.9 4,454 1.5 62.7 4.7 0.9

Business growth remains muted

During 4QFY2013, the bank witnessed muted growth in its business, with advances and deposits registering a growth of 5.1% and 3.2% yoy, respectively. Slow growth was attributed to the ongoing consolidation of balance sheet. Growth in advances was primarily on the back of increased lending to the services sector (growth of 16.7% yoy). While the banks retail book grew at moderate 7.2% yoy, housing and car loan book, within the retail book grew at relatively higher 13.3% and 15.1% yoy, respectively. Overseas advances registered a growth of 47.4% yoy. As of 4QFY2013, these constitute around 10% of the banks total loan book. On the liabilities front, current deposits witnessed moderate growth of just 4.9% yoy (higher sequentially by 17.9%), while saving deposits grew stronger at 16.9% yoy (5.4% qoq). Hence, overall CASA deposits grew by 14.3% yoy, much higher than the growth of 3.2% yoy registered in overall deposits. Consequently, the reported CASA ratio improved by 466bp yoy (242bp sequentially) to 40.9%. During 4QFY2013, the bank shed around `10,150cr of differential rate deposits (including CDs). Consequentially, the banks share of differential rate deposits (including CDs) has reduced substantially from 15.3% as of 3QFY2013 to 12.5% as of 4QFY2013.
May 11, 2013

Punjab National Bank | 4QFY2013 Result Update

Exhibit 4: Higher Corporate/Retail lending aids moderate loan book growth

Particulars (` cr) Agri Retail MSME Medium & Large Corporates Comm. Real Estate Services & Others Domestic non-food credit Food credit Domestic credit Overseas advances Global gross credit
Source: Company, Angel Research

4QFY13 38,055 31,310 33,568 98,421 9,220 55,501 6,057 32,058

3QFY13 41,750 30,295 31,186 93,190 9,140 60,380 6,691 30,100

% chg (qoq) (8.9) 3.4 7.6 5.6 0.9 (8.1) (9.5) 6.5

4QFY12 45,917 29,196 32,391 91,392 9,661 58,015 5,186 21,755

% chg (yoy) (17.1) 7.2 3.6 7.7 (4.6) (4.3) (0.2) 16.8 0.1 47.4 3.6

266,075 265,941 272,132 272,632 304,190 302,732

0.1 266,572 (0.2) 271,758 0.5 293,513

Exhibit 5: Business growth subdued

Adv. yoy chg (%) 25.0 77.4 20.0 76.4 15.0 10.0 73.6 76.0 74.0 77.1 Dep. yoy chg (%) CDR (%, RHS) 78.8 80.0 78.0

Exhibit 6: CASA ratio improved sequentially

Calculated CASA ratio (%) 38.0 35.0 32.0 29.0 26.0 11.5 9.8 10.0 15.6 13.1 14.3 CASA yoy growth (%, RHS) 20.0

21.3 21.3

21.2 18.9

18.4 17.3

13.2 8.2

35.3

34.6

35.8

36.9

5.0 -

72.0

23.0 20.0

5.1 3.2

70.0

39.2

4QFY12 1QFY13 2QFY13 3QFY13 4QFY13

4QFY12 1QFY13 2QFY13 3QFY13 4QFY13

Source: Company, Angel Research

Source: Company, Angel Research

NIMs largely stable at 3.5%

The banks yield on advances and Yield on investments declined by 17bp and 7bp qoq. The banks cost of deposits reduced by 13bp qoq to 6.6%. Yield on funds for the bank declined by 31bp qoq to 8.5%, while cost on funds declined sequentially by 28bp to 5.4%. Consequently, the reported NIM of the bank remained largely stable at 3.5%. Going forward, the management expects NIMs to moderate to 3.4% in coming few quarters.

May 11, 2013

Punjab National Bank | 4QFY2013 Result Update

Exhibit 7: Yield on funds lower by 31bp sequentially

(%) 9.50 9.00 8.50 8.00 7.50 7.00 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 8.67

Exhibit 8: NIM stable sequentially at 3.5%

(%) 3.80

9.13 8.87 8.81 8.50

3.60 3.60 3.40 3.20 3.00 2.80 2.60 4QFY12 1QFY13 2QFY13 3QFY13 3.50 3.50 3.47

3.51

4QFY13

Source: Company, Angel Research

Source: Company, Angel Research

Subdued performance on the non-interest income (excluding treasury) front

During 4QFY2013, the non-interest income (excluding treasury) de-grew by 23.2% yoy, on back of lower recoveries and poor performance on the fee income as well as on the forex income front. Bank saw de growth in Recoveries from written-off accounts substantially by 46.1% yoy to `130cr and Income from forex transactions by 20.0% yoy to `128cr. CEB fees for the bank de grew by 14.6% yoy, while Bills and Remittance de grew by 39.6% yoy. Trading profit increased strong by 67.8% yoy to `267cr. Overall, other income came in `1,174cr registering a de growth of 8.0% yoy.

Exhibit 9: Non-interest inc. remains subdued yoy

Particulars (` cr) CEB Treasury incl. MF Dividend Forex Recoveries Others Other income Other income excl. treasury
Source: Company, Angel Research

4QFY13 519 321 128 130 76 1,174 853

3QFY13 509 123 114 145 79 970 847

% chg (qoq) 2.0 161.0 12.3 (10.3) (3.8) 21.0 0.7

4QFY12 608 165 160 241 102 1,276 1,111

% chg (yoy) (14.6) 94.5 (20.0) (46.1) (25.5) (8.0) (23.2)

Lower slippages and steady recoveries/upgrades, leads to improvement in asset quality

During the quarter, the bank reported improvement in asset quality, as slippages ratio for the year FY2013 moderated to 2.94%, as compared to annualized slippage ratio of 3.48% recorded for 9MFY2013. Also, recoveries/upgrades as a proportion to opening advances have remained stable at 1.0% for FY2013 as compared to 1.0% for 9MFY2013. Consequently, on an absolute basis, gross and Net NPAs improved by 3.8% and 4.6%, sequentially, respectively. Gross and net NPA ratios, for the bank came off sequentially by 34bp and 21bp, to 4.6% and 2.6%, respectively. PCR for the bank improved by 280bp qoq to 58.8%. Going ahead, the management expects NPA ratios to improve in coming quarters, as they expect recovery levels to improve.
May 11, 2013

Punjab National Bank | 4QFY2013 Result Update

Additionally, the bank restructured advances worth ~`6,444cr during the quarter, compared to `3,700cr restructured in 3QFY2013. As of 4QFY2013, its outstanding restructured book, which is stated borrower-wise, stood at `32,143cr (~10% of its advances). Out of the outstanding restructured book, 38.1% comes from power sector (majorly discoms).

Exhibit 10: Slippages cool off, so...

Slippages (%, cumulative) 6.0 5.0 4.0 3.0 2.0 0.4 0.6 0.6 0.8 0.9 Credit cost (%, cumulative, RHS) 1.0 0.7 0.7 0.8

Exhibit 11: ... Asset quality improves

Gross NPAs (%) 5.0 4.0 3.0 2.0 54.3 56.0 62.7 62.8 58.8 Net NPAs (%) PCR (%, RHS) 64.0 62.0 60.0 58.0 56.0 54.0

2.9 1.5

3.3 1.7

4.7 2.7

4.6 2.6

2.8

3.8

5.0

3.5

2.9

4.3 2.4

1.0 -

0.2 -

1.0 -

52.0 50.0

FY2012

1QFY13

1HFY13

9MFY13

FY2013

4QFY12 1QFY13 2QFY13 3QFY13 4QFY13

Source: Company, Angel Research;

Source: Company, Angel Research

Cost-to-income ratio up by 640bp yoy to 42.4%

Operating expenses for the bank were higher by 27.4% on a yoy basis, on back of 41.2% yoy increase in employee expenses due to wage revision and 5.7% yoy increase in other operating expenses. However, growth in operating income was modest at 12.9% yoy, which led the cost-to-income ratio to increase by 640bp yoy to 42.4%.

Exhibit 12: Steady branch expansion continues

Branches 5,900 5,850 5,800 5,750 5,700 5,650 5,600 5,550 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13
Source: Company, Angel Research

Exhibit 13: Cost-to-income ratio increases

Cost-to-income ratio (%) 1.8 50.0 40.0 30.0 20.0 1.5 Opex to average assets (%, RHS) 1.8 1.8 1.7 1.7 1.7 1.6 1.5

ATMs (RHS) 6,313 6,058 6,400 6,300

6,009

6,059

6,005

6,200 6,100

5,658

5,697

5,748

5,788

5,873

6,000 5,900 5,800

36.0

41.6

44.4

43.0

10.0 -

42.4

1.4 1.3

4QFY12 1QFY13 2QFY13 3QFY13 4QFY13

Source: Company, Angel Research

May 11, 2013

Punjab National Bank | 4QFY2013 Result Update

Investment arguments
Strong CASA legacy, but losing market share
PNB has a structural advantage of having relatively better CASA ratio of 40.9% (as of 4QFY2013), which is driven by strong rural and semi-urban presence, especially in North India (total of 5,874 branches and 6,300+ ATMs). Although the high CASA ratio improved to 40.9% from 36.2% in 4QFY12 and is expected to help sustain the higher NIMs, the bank has been losing its market share like most other public sector banks on account of slow branch expansion and competition from private banks. PNBs savings market share declined by from 7.9% to around 7.3% during FY200813.

Investment concerns
Asset quality improves but remains under watch
PNB was one of the highest risk-taking banks immediately post the Lehman crisis and initially, started delivering very high yield on assets and RoEs of as much as 26%. For the last couple of years, we had been concerned that the inevitable seasoning of that book would lead to asset quality issues for the bank and that is what was being reflected in the numbers. During FY2012, slippage ratio for the bank came in at 2.7%, the highest in the past four years. In 1HFY2013, it spiked sharply to 5.0%. In 2HFY2013, the annualized slippage ratio has come off from those highs, as slippage ratio for entire FY2013 has come in at 2.9%. Even during 2HFY2013, the bank registered an improved performance on the recoveries/upgrades front, which has led to improvement in its NPA levels. However, going ahead, we still remain cautious on the incremental asset quality pressures for the bank in the near term, as we take into account the banks relatively higher exposure to risky sectors and the overall weak macro-economic environment.

Outlook and valuation

The banks valuations are currently at a low of 0.7x FY2015 ABV compared to its eight year range of 1.01.6x and median of 1.4x. due to the asset quality concerns facing the sector. The bank structurally has lower cost of deposits than peers and has cyclically already experienced relatively higher asset quality pain than peers. With asset quality improvements and consolidation of balance sheet, we expect prospects to improve for the bank. Even valuation-wise, the stock is trading below the lower end of its historical range. Hence, we recommend Buy with a target price of `945.

May 11, 2013

Punjab National Bank | 4QFY2013 Result Update

Exhibit 14: Key assumptions

Particulars (%) Credit growth Deposit growth CASA ratio NIMs Other income growth Growth in staff expenses Growth in other expenses Slippages Coverage
Source: Angel Research

Earlier estimates FY2014E 14.0 14.0 36.4 3.2 3.2 12.0 12.0 2.6 65.0

Revised estimates

FY2015E FY2014E FY2015E 16.0 16.0 36.2 3.3 12.1 12.0 12.0 2.5 70.0 14.0 14.0 38.9 3.3 0.8 12.0 12.0 2.5 65.0 16.0 16.0 38.6 3.4 9.3 12.0 12.0 2.3 70.0

Exhibit 15: Change in estimates

FY2014E Particulars (` cr) NII Non-interest income Operating income Operating expenses Pre-prov. profit Provisions & cont. PBT Prov. for taxes PAT
Source: Angel Research

FY2015E Earlier estimates 19,307 4,859 24,166 10,198 13,968 4,521 9,447 3,211 6,236 Revised Var. (%) estimates 19,283 4,646 23,929 10,242 13,687 4,210 9,477 3,221 6,256 (0.1) (4.4) (1.0) 0.4 (2.0) (6.9) 0.3 0.3 0.3

Earlier estimates 16,827 4,334 21,161 9,105 12,056 3,840 8,216 2,792 5,423

Revised Var. (%) estimates 16,625 4,251 20,876 9,145 11,731 3,607 8,125 2,762 5,363 (1.2) (1.9) (1.3) 0.4 (2.7) (6.1) (1.1) (1.1) (1.1)

Exhibit 16: P/ABV band

Price (`) 2,800 2,400 2,000 1,600 1,200 800 400 0 0.5x 0.9x 1.3x 1.7x 2.1x

Apr-04

Apr-05

Apr-06

Apr-07

Apr-08

Apr-09

Apr-10

Apr-11

Apr-12

Oct-04

Oct-05

Oct-06

Oct-07

Oct-08

Oct-09

Oct-10

Oct-11

Source: Company, Angel Research

Oct-12

Apr-13

May 11, 2013

Punjab National Bank | 4QFY2013 Result Update

Exhibit 17: Recommendation summary

Company AxisBk FedBk HDFCBk ICICIBk* SIB YesBk AllBk AndhBk BOB BOI BOM CanBk CentBk CorpBk DenaBk IDBI# IndBk IOB J&KBk OBC PNB SBI* SynBk UcoBk UnionBk UtdBk VijBk Buy Neutral Neutral Buy Neutral Neutral Accumulate Neutral Buy Accumulate Neutral Accumulate Neutral Accumulate Neutral Neutral Buy Neutral Neutral Accumulate Buy Accumulate Neutral Neutral Accumulate Accumulate Neutral Reco. CMP (`) 1,473 456 702 1,168 24 512 124 92 705 339 57 424 72 410 94 88 161 63 1,359 258 773 2,306 130 74 241 60 53 Tgt. price (`) 1,714 1,357 142 815 360 461 453 186 282 945 2,572 264 64 Upside (%) 16.4 16.2 14.6 15.7 6.2 8.6 10.5 15.0 9.3 22.3 11.6 9.9 6.4 FY2015E P/ABV (x) 1.6 1.0 3.3 1.7 0.9 2.2 0.5 0.6 0.7 0.8 0.6 0.7 0.6 0.5 0.5 0.5 0.5 0.4 1.0 0.5 0.7 1.3 0.7 0.8 0.7 0.4 0.6 FY2015E Tgt. P/ABV (x) 1.9 2.0 0.6 0.9 0.8 0.8 0.6 0.6 0.6 0.9 1.4 0.8 0.4 FY2015E P/E (x) 9.7 7.7 16.5 12.1 5.4 10.7 3.4 3.9 4.9 5.0 4.3 4.9 4.0 3.9 3.5 4.7 3.8 3.1 6.8 4.1 4.4 8.2 4.5 5.1 5.0 2.9 4.9
#

FY2013-15E EPS CAGR (%) 17.3 10.0 22.8 15.5 11.4 14.9 12.6 4.2 17.0 21.8 14.8 14.0 42.8 8.3 4.3 15.2 6.5 53.3 (5.2) 17.5 12.4 16.4 (3.5) 36.9 21.2 40.4 21.2

FY2015E RoA (%) 1.6 1.2 1.8 1.5 1.0 1.3 0.8 0.8 1.0 0.8 0.6 0.8 0.6 0.8 0.8 0.7 1.0 0.7 1.2 0.8 1.0 1.0 0.7 0.6 0.8 0.7 0.5

FY2015E RoE (%) 17.6 13.7 21.8 15.6 17.1 22.1 14.2 13.4 16.0 15.1 15.6 14.1 13.3 14.4 15.3 11.3 14.9 13.1 16.0 13.1 16.3 17.0 15.2 12.6 15.3 14.7 11.7

Source: Company, Angel Research; Note:*Target multiples=SOTP Target Price/ABV (including subsidiaries), Without adjusting for SASF

Company Background
Punjab National Bank is the country's second-largest bank, with a balance sheet size of ~`4.8lakh cr and a pan-India network of over 5,800 branches. The bank's network is primarily spread over northern India, i.e. in Punjab, Haryana and Uttar Pradesh. Almost 62% of its branches are based in rural and semi-urban hinterland, which results in a large legacy of low-cost CASA deposits (at 40.9% of deposits; amongst the highest in the sector).

May 11, 2013

Punjab National Bank | 4QFY2013 Result Update

Income statement
Y/E March (` cr) Net Interest Income - YoY Growth (%) Other Income - YoY Growth (%) Operating Income - YoY Growth (%) Operating Expenses - YoY Growth (%) Pre - Provision Profit - YoY Growth (%) Prov. & Cont. - YoY Growth (%) Profit Before Tax - YoY Growth (%) Prov. for Taxation - as a % of PBT PAT - YoY Growth (%) FY10 8,478 20.6 3,610 23.6 12,088 21.5 4,762 13.2 7,326 27.5 1,422 44.9 5,905 24.0 1,999 33.9 3,905 26.4 FY11 11,807 39.3 3,613 0.1 15,420 27.6 6,364 33.6 9,056 23.6 2,492 75.3 6,564 11.2 2,130 32.5 4,434 13.5 FY12 13,414 13.6 4,203 16.3 17,617 14.2 7,003 10.0 10,614 17.2 3,577 43.6 7,037 7.2 2,153 30.6 4,884 10.2 FY13 14,857 10.8 4,216 0.3 19,072 8.3 8,165 16.6 10,907 2.8 4,386 22.6 6,522 (7.3) 1,774 27.2 4,748 (2.8) FY14E 16,625 11.9 4,251 0.8 20,876 9.5 9,145 12.0 11,731 7.6 3,607 (17.8) 8,125 24.6 2,762 34.0 5,363 13.0 FY15E 19,283 16.0 4,646 9.3 23,929 14.6 10,242 12.0 13,687 16.7 4,210 16.7 9,477 16.6 3,221 34.0 6,256 16.6

Balance sheet
Y/E March (` cr) Share Capital Reserve & Surplus Deposits - Growth (%) Borrowings Tier 2 Capital Other Liab. & Prov. Total Liabilities Cash Balances Bank Balances Investments Advances - Growth (%) Fixed Assets Other Assets Total Assets - Growth (%) FY10 315 17,408 249,330 18.9 8,572 10,690 10,318 296,633 18,328 5,146 77,724 186,601 20.6 2,513 6,320 296,633 20.1 FY11 317 21,192 312,899 25.5 20,399 11,190 12,328 378,325 23,777 5,914 95,162 242,107 29.7 3,106 8,259 378,325 27.5 FY12 339 27,478 379,588 21.3 26,074 11,190 13,524 458,194 18,493 10,335 122,629 293,775 21.3 3,169 9,793 458,194 21.1 FY13 353 32,323 391,560 3.2 28,710 10,911 15,019 478,877 17,886 9,249 129,896 308,725 5.1 3,358 9,763 478,877 4.5 FY14E 353 36,495 446,378 14.0 32,597 10,638 17,239 543,701 20,087 9,515 147,370 351,947 14.0 3,698 11,084 543,701 13.5 FY15E 353 41,334 517,799 16.0 37,629 10,372 20,148 627,635 23,301 10,984 168,157 408,258 16.0 4,141 12,795 627,635 15.4

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Punjab National Bank | 4QFY2013 Result Update

Ratio analysis
Y/E March Profitability ratios (%) NIMs Cost to Income Ratio RoA RoE B/S ratios (%) CASA Ratio Credit/Deposit Ratio CAR - Tier I Asset Quality (%) Gross NPAs Net NPAs Slippages Loan Loss Prov. /Avg. Assets Provision Coverage Per Share Data (`) EPS ABVPS (75% cover.) DPS Valuation Ratios PER (x) P/ABVPS (x) Dividend Yield DuPont Analysis NII (-) Prov. Exp. Adj. NII Treasury Int. Sens. Inc. Other Inc. Op. Inc. Opex PBT Taxes RoA Leverage RoE 3.1 0.5 2.6 0.3 2.9 1.0 3.9 1.8 2.2 0.7 1.4 18.5 26.6 3.5 0.7 2.8 0.1 2.8 1.0 3.8 1.9 1.9 0.6 1.3 18.6 24.4 3.2 0.9 2.4 0.1 2.4 0.9 3.4 1.7 1.7 0.5 1.2 18.0 21.1 3.2 0.9 2.2 0.1 2.3 0.8 3.1 1.7 1.4 0.4 1.0 16.3 16.5 3.3 0.7 2.5 0.0 2.6 0.8 3.4 1.8 1.6 0.5 1.0 15.3 16.1 3.3 0.7 2.6 0.0 2.6 0.8 3.4 1.7 1.6 0.6 1.1 15.5 16.5 6.2 1.5 2.8 5.5 1.2 2.8 5.4 1.1 2.8 5.8 1.0 3.5 5.1 0.8 3.8 4.4 0.7 4.5 123.9 514.8 22.0 139.9 628.2 22.0 144.0 734.2 21.8 134.3 803.0 27.0 151.7 943.0 29.0 177.0 1,103.9 34.5 1.7 0.5 1.8 0.4 81.2 1.8 0.8 2.3 0.6 73.2 2.9 1.5 2.7 0.6 62.7 4.3 2.3 2.9 0.7 58.8 4.7 2.1 2.5 0.6 65.0 5.0 1.8 2.3 0.6 70.0 40.8 74.8 14.2 9.1 38.5 77.4 12.4 8.4 35.3 77.4 12.6 9.3 39.2 78.8 13.6 10.5 38.9 78.8 13.2 10.4 38.6 78.8 12.6 10.2 3.2 39.4 1.4 26.6 3.6 41.3 1.3 24.4 3.3 39.7 1.2 21.1 3.3 42.8 1.0 16.5 3.3 43.8 1.0 16.1 3.4 42.8 1.1 16.5 FY10 FY11 FY12 FY13 FY14E FY15E

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Punjab National Bank | 4QFY2013 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

DISCLAIMER
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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

Punjab National Bank No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

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