Punjab National Bank's June 2011 quarter performance was similar to that of other public sector banks in terms of rising non-performing assets (NPA), falling low-cost deposit proportion, modest other income growth, high provisioning requirement and moderation in profits/ profit growth.

Yet, PNB managed to stand out from others on one count. The bank managed to limit the margin shrinkage better than its peers. The net interest margin (NIM) for the quarter ended June 2011 was 3.84 per cent as against 3.91 per cent in the March 2011 quarter. Adjusting for the savings account hike, the margins have actually improved. This is despite credit-deposit ratio falling and the low-cost deposit proportion shrinking. Lower proportion of deposits coming up for maturity and hikes in lending rates helped the bank maintain its margins. Another reason for lesser shrinkage in NIM was that the bank had already seen NIM peaking in the December quarter, unlike many other banks.

The net profit growth of 3.5 per cent year-on-year was depressed due to a 67-per cent rise in the provisioning in addition to lower NII growth. The provision for investment depreciation went up almost 8.8 times. Higher provision for investments may continue given that the bank's modified duration continues to be on the higher side. Provisions were also higher as PNB took a one-time hit on standard asset provisioning due to RBI's changed norms. A 30-per cent rise in other operating expenses also hurt profit growth. The bank, in the first quarter, added half the number of branches it added during the whole of last year.

PNB continues to be one of the few banks which have managed to keep its NPAs under control thanks to higher provisions. The net NPA ratio continues to be at manageable levels of 0.86 per cent as against 0.85 per cent in the March 2011 quarter.

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