Ladies and gentlemen, good day and welcome to the Punjab National Bank Q1 FY26 earnings conference call hosted by Elara Capital. 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, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Palak Shah from Elara Capital. Thank you, and over to you, ma'am.
Hello everyone. It's the earnings conference call of Punjab National Bank. Today we have with us the management of the bank, headed by Mr. Ashok Chandra, MD and CEO, Mr. Kalyan Kumar, Executive Director, Mr. Paramasivam, Executive Director, Mr. Bibhu Prasad Mahapatra, Executive Director, and Mr. Surendran, Executive Director. With this brief introduction, I would like to hand over the call to Mr. V.P. Bansal, DGM Strategic Management and Equity.
Sir.
Disclaimer statement, after which MD sir will address the conference. Thank you, and over to you, sir.
contains certain forward-looking statements apart from historical information. These forward-looking statements involve a number of risks, uncertainties, and other factors 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 day. Thank you.
Good evening, ladies and gentlemen. I am Ashok Chandra, MD and CEO of Punjab National Bank. Warm welcome to this analyst meet. I will just give the highlights of our business profitability and key important ratios. The global gross business of the bank stood at INR 27.19 trillion as of June 2025, with a yearly growth rate of 11.6%. The global deposits stood at INR 15.89 trillion, with a YOY growth rate of 12.9%, and global advances stood at INR 11.30 trillion, with a YOY growth rate of 9.8%. We are well above our guidance of 9%-10% for deposits, and there has been slight degrowth and slight credit growth behind the guidance of 11%-12%. Of course, we have the sanctioned credit limit to the tune of around INR 1.30 lakh crore, which are yet to be disbursed. CD ratio of the bank is at 70.9% as of June 2025.
The CASA share is 37% as of June 2025, and our CASA deposits have recorded a growth of 3.6% on YOY basis. CASA ratio is muted in this particular quarter, but we have mobilized 26.31 lakh new CASA accounts in Q1 of 2025, with total fresh CASA accretion to the tune of 4,686 crores. Our RAM advances stands at 6.11 trillion, which is around 56.6% of the domestic advances. The share of RAM advance was at 55.5% as of June 2024. Coming to the profitability numbers, the net interest income stood at 10,578 crore, with a YOY growth of 1% for Q1 FY26, despite the 100 basis point cut in the repo rate, and that has been passed to the clients also. Our deposit NIM percentage is at 2.84% for Q1 FY26, whereas the global NIM percentage stood at 2.70%. We are well below our guidance.
We are below our guidance at our NIM at 2.8%-2.9% for 2025. However, the same is expected to improve from Q3 onwards, based on the repricing of deposits and positive impact on account of MCLR curves. The operating profit for Q1 FY26 is INR 7,081 crore, which has improved from INR 6,581 crore for Q1 of FY25 and INR 6,776 crore for Q4 of 2025. This is all-time highest in our bank. YOY growth rate of operating profit is 7.60%. Profit before Tax of the bank for Q1 FY26 is INR 6,758 crore, as against INR 5,269 crore in Q1 of financial year 2025, depicting a YOY growth rate of 28.3%.
However, net profits have reduced to INR 1,675 crore in Q1 FY26 from the level of INR 3,252 crore in Q1 FY25 and INR 4,567 crore in Q4 of FY25, on account of shifting to the new tax regime and one-time income tax provision made thereupon. Going forward, our net profit will reflect a healthy trend of improvement. If I can talk about the efficiency ratio, the net profits are lower in this quarter on account of one-time IT provision based on the shifting to the new tax regime. As such, our efficiency ratios are not a true reflector for this particular quarter. The same will improve from the Q2 onwards. Return on assets stood at 0.3% for Q1 FY26 because of the lower net profit, and on account of shifting to the new tax regime. Return on equity stood at 6.59% for Q1 FY26.
Earnings per share, not annualized, is INR 1.46 for Q1 FY26. Our tangible book value per share, as of 30 June 2025, is 92.64, which has increased from the level of 73.11 as of 30 June 2024. If I can talk about the asset quality, the bank has done very well in NPA management and reducing the stress level in the portfolio. The asset quality, the GNPA, has reduced to 3.78% as of 30 June 2025, from 4.98% in June 2024 and 3.95% in March 2025. Similarly, the net NPA percentage, which was 0.60% in June 2024, has improved to 0.38% in June 2025. We are on a track to achieve our guidance for GNPA ratio and net NPA ratio for 2026 at below 3% and 0.35%, respectively.
Our provision coverage ratio stands at 96.88% as of June 30, 2025, which is well above our guidance of more than 96% for FY26. The total fresh slippages during Q1 of FY26 was INR 1,886 crore, as against INR 3,001 crore in Q4 2025. Our guidance for slippages ratio was to remain below 1% in FY26. We are within our guidance level, as slippages ratio for the Q1 FY26 remained at 0.71%. The total recovery stood at INR 3,356 crore for Q1 FY26, as against INR 3,249 crore in Q1 FY25. Our recovery continues to be more than the slippages, reflecting the improving asset quality. The credit cost stood at 0.14% for Q1 FY26, well within our guidance for credit cost, which is below 0.5% for the current financial year. There is one highlight I want to bring to all the esteemed members who are present here about the asset quality underwriting.
From July 20 onwards till June 30, 2025, we have sanctioned INR 11.34 trillion loans, out of which we have disbursed around INR 9.84 trillion loans. The outstanding in these loans is INR 7.18 trillion as of June 30, 2025, which is close to 63% of our total outstanding loan book. The NPA in this book is hardly INR 3,964 crore, which is only 0.40% of the disbursed amount under fresh underwriting. Segment-wise breakup of NPA in fresh underwriting is under retail 0.38%, agri 0.59%, MSME 1.58%, and for corporate, it is negligible at 0.01%. This speaks about the good underwriting which the bank has undertaken. If I can talk about the capital structure of the bank, as far as the capital is concerned, our capital adequacy is 17.50% as of June 30, 2025, compared to 15.79% as of June 30, 2024, and 17.01% as of March 31, 2025.
Our CET1 and Tier 1 and Tier 2 capital stands at 12.95%, Tier 1 14.62%, Tier 2 2.88%. A lot of digital initiatives the bank has undertaken, and I will highlight some of the digital penetration which the bank has taken. The bank is continuously augmenting its digital base and focusing on building digital capabilities under the domain of AI/ML and analytics-based business generation, and the same is yielding tremendous results for the bank. The share of digital transactions has reached more than 95% for Q1 FY26 versus 89% in Q1 FY25. There is more than 100% increase in UPI transactions done through our mobile application, PNB One. The number of WhatsApp banking users has gone up by over 100% from 34 lakh as of June 30, 2024, to 69.7 lakh as of June 30, 2025.
Our corporate mobile banking, launched on September 18, 2024, serves to more than 1.41 lakh customers, with an app rating of 4.1 on Play Store and 4.2 on Android. Sanctions under Digi lending journeys have crossed 27,900 crore, and every fifth loan is sanctioned in the bank through the digital mode. We have onboarded 4.58 lakh CBDC customers, and 74.71 lakh transactions are done through the CBDC app till June 30, 2025. Some other key initiatives undertaken recently include our Gen AI chatbot, Pihu, available on our website. IBS and PNB One, further various enhancements have been made in the PNB One Business Mobile app. We are promoting financial inclusion through digital channels with our comprehensive digital SHG journey, Digi MSME loans, e-Mudra loans, e-PM Vishwakarma, and Digi Surya Ghar Yojana schemes. To further digital push, the bank is onboarding a system integrator for full-fledged Gen AI implementation.
Further, we have planned to launch a unified solution to streamline our more than 100 digital journeys. We are also looking forward to revamping our internet banking solution and mobile banking applications. Human resources plays a very, very important role in any organization, and the bank has done a lot of initiatives under human resources. The bank has adopted a new HR ecosystem driven by Project Udaan. We are undertaking this project in two parts, namely digital PMS and capacity building. Under digital PMS, careers of employees are being revamped to make them more business-oriented and impact-driven, ensuring a stronger alignment with the strategic objectives and operational goals of the bank. Further, we have launched the Udaan mobile app for employees on both Android and iOS platforms to track their progress conveniently.
Under capacity building, we are undertaking numerous steps involving leadership development programs, Gen AI learning chatbot, and comprehensive skill development programs for employees. My concluding remarks are that the focus area for the bank is on increasing CASA base in total deposits and RAM share in total advances. The same will help in the improvement of NIM and profitability of the bank. Further, containment of slippages and robust recovery will remain the priorities of the bank. With digital and HR transformation being undertaken, the bank will witness durable growth in business and profitability on a consistent basis. Balance sheet has strengthened. Bad assets of the bank have reduced substantially, and provisioning has increased. The bank will endeavor to increase its market share in both deposits and advances. Thank you very much.
Along with me, my entire top management team is there to answer any of your queries, clarifications, or any guidance. We are there too.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and One on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press Star and Two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have a first question from the line of Akshit Agarwal from Systematix Institutional Research. Please go ahead.
Good evening, sir. Thank you for the opportunity. My first question is on recoveries. There were weaker technical recoveries than interest accruals. If you can shed more light on this, that would be great.
And how do you see the rest of the year? And further, the asset quality was benign with reduced credit costs and slippages, but the SMA2 ratio picked up marginally, even though overall numbers remained favorable. Can we get more color on this, please? That was my first question. Thank you.
Yeah, first, I will touch about the recovery. In this particular quarter, the total recovery is 3,356 crore, and the recovery in the technical write-off is around 1,200 crore. And if I add this recovery in TW and the interest, the total amount is 1,700 crore. So this is all about recovery. And the guidance for this year, already we have given that 16,000 crore will be the total recovery, which we will be doing it. And within that 16,000, 1,500 crore per quarter, that is around 6,000 crore recovery will happen through the technical write-off.
Right, sir.
This quarter, it was slightly weaker. Is it like some seasonal, or is it like just a kind of this quarter you would expect better recoveries the rest of the year? It just was a blip at this point.
Yeah, the total recovery target which we have given, definitely we are going to achieve. See, in the first quarter, always the business and the total activity also remains muted because of the various transfers and all those issues happening in the first quarter. With that, I think the team has done very well, and we are able to recover INR 3,300 crore. Going forward, already there were some accounts which we were expecting that will happen in the June quarter. Already those accounts have come now. In the month of July itself, we have a good number for the Q2.
So I'm expecting that the guidance which we have given, 16,000 crore of total recovery, definitely we are going to touch this number.
Right, sir. Thank you. My second question is on operating expense. I wanted to understand the reason behind elevated operating expense this quarter. OpEx growth was like 16%-17% year-on-year, with other OpEx going at 22% year-on-year. So is it going to stay elevated for the year, or is it like there was some one-off going in this quarter or some discount rate or something else?
See, what happens in the first quarter, because of the PSLC which we purchased for the priority sector, that is the PSLC priority sector lending certificate, and that amount itself is around 800 crore now, 850 crore. So that is one of the reasons the operating cost for this particular quarter, you see that some number is high.
Otherwise, definitely there will be stable expenses will be there in future Q2, Q3 onwards.
Right, sir. Thank you. Just I wanted to squeeze in one more question if that's all right. If we exclude one of tax provisions of like INR 33 billion, your ROA would be greater than 1%. With NIMs continuing to decline, weak credit growth, and treasury gains might not stay that elevated throughout the year. So what are the levers you are going to use to deliver over 1% ROA for the rest of the year? Thank you.
See, first of all, with the migration to the new tax regime, that itself is going to help us by around 16 basis points in the ROA. That is the first point. Second point is, see, the NIM and the NII is muted for this particular quarter.
And in fact, in the last meeting also, I had indicated that Q1 and Q2 will be a challenging quarter for maintaining the NIM and the NII. But definitely, the repricing which is happening in the deposit front and the deposit rate which has been reduced, I'm expecting that Q3 onwards, definitely the bank will have the good NIM and good NII. I think the guidance which we have given for the NIM is around 2.8%-2.9%. Definitely, we are going to hold on to this guidance.
Right, sir. Thank you very much for answering all my questions. All the best. Thank you.
Thank you. The next question is from the line of Ashok Ajmera from Ajcon Global. Please go ahead.
Yeah, thank you for the opportunity. And compliments to you, Ashok sir, and all the engineers and top management of Punjab National Bank.
Sir, you are firing on all cylinders.
Thank you.
In the earlier question, you already answered that in spite of being a major recovery portion, why in this quarter the recoveries were less than the overall proportion for the one quarter. That is a valid point also. June quarter being a little subdued quarter from the recovery point of view. Having said that, sir, I have got a couple of some observations and some questions. Sir, just one is on the change in the tax regime. If I understand correctly, out of this higher provision for the tax of INR 5,083 crore, INR 1,600 or INR 1,700 would have been otherwise also the tax liability. Basically, INR 3,300 or INR 3,400 crore has gone from that DTA. What is the exact calculation?
Because at the year end, if we take it, almost about 29,500 crore of operating profit according to your guidance of 9% plus. So on that, our tax liability overall will be 7,300 something under the new regime. So can I just understand that what would be the final tax figure in the P&L in FY26 if that profit assumption is correct?
Yeah, I will just share some facts about this. You have rightly mentioned that 3,324 crore has come out with the DTA which the provision higher tax was there. Now, because of the migration to the new tax regime, that is 24.98, so it's 25%. So to that extent, 3,324 crore we have to save down. And 1,700 crore would have gone normally also with the tax regime. So that is the total outgo 5,000 crore plus is the outgo for this particular quarter.
Now, from the new tax regime means regime, Q2 onwards, we will have to pay tax at the rate of 25%. And assuming this INR 7,000 crore the operating profit which the bank has shown, and the first time we have shown the INR 7,000 crore of operating profit, and I am hopeful that this trend will continue. So directly, 10% if I can reduce because 35% is the old tax regime and 25% is the new. So 10% I am going to save. It means in the absolute number it is INR 700 crore minimum every quarter I am going to save on account of the migration to the new tax regime. So if you can calculate the three quarter, it comes to around INR 2,100 crore net accretion will happen in the net profit. So I think this is the way I perceive and I can project it now.
Yes, sir.
Sir, we have performed well in this quarter backed by treasury profits. We have made handsome treasury profits and also something in the revaluation of investment also. So going forward, excuse me, with further rate cuts expectations, maybe in the later half of this year, maybe two cuts of 20 basis point going forward. One thing is that we are going to have some pressure on the margins because of the lag effect in the MCLR-backed accounts and similarly for the deposits. And on the other side, we will have a bumper treasury profit if we deal properly in the treasury books.
So having said that, will this treasury profit which has shown 1,816 crore is the profit plus overall, if you see the segment-wise income on the treasury, it is 3,415 crore as against 1,963 crore in the last quarter. So going forward, we are continuing to see the same trend on the treasury income, or do you think it will get a little muted?
In this financial year, since we have built a very strong treasury book now, if you see our entire total portfolio under the treasury itself is around touching 5 lakh crore now. And with the lower tax and lower interest rate regime, which also you have highlighted, definitely, I think this book is going to contribute in a very, very bigger way to the overall income of the bank.
And we are very confident that good treasury book is going to give us a good income in the Q2, Q3 also now. So that trend will continue.
Good, sir. But on advances on the credit side, sir, we are a little bit slowed down. Though in this quarter, having anything positive itself is a very good positive point. Like your 1.19% quarterly credit advances have increased. But still, looking at PNB and your potential of you and your team, I feel that I don't think there is any dearth of the proposals which are coming in. There must be a strong sanction pipeline also in many proposals which are in the pipeline.
So are we still sticking to that 11%-12% and will be able to achieve even, I mean, that also in next three quarters, or we feel it's a conservative one and you might go to maybe higher bracket of 12%-13% or something on the credit front? Because I see PNB is now full-fledged again into the market. And I think you are the most sought-after bank today. So looking at this, and then, sir, this SMA numbers a little bit increased in this quarter at 1,596 crore against 239 crore in March. Is there any specific region, any one-off account in this, or is it right by now?
First, I will touch about the credit growth part. If you see, MSME growth, we have shown a growth of more than 18%. It is 18.6% growth in MSME. Core retail has grown by 17.7%.
What we have missed out in the corporate loan growth, there is a growth. But in fact, both QOQ growth is also there, and YOY growth is also there. But the challenge which has come in the corporate book is that we have INR 1,29,000 crore of sanctions in our book now. And disbursements have started happening, but there are many project financing we have done now. In fact, we are building up good project financing now. Good projects we are undertaking, and we are going in a very, very big way for those project financing. So you know that disbursements also take time in the project financing, one year, two years' time it takes. But INR 1,30,000 crore of book is already there with us and going to be disbursed in Q2, Q3 onwards. So this is one strong point before us is there.
In the project means total corporate book, if I can talk about the diversified activity which we have taken. Time, we have taken good proposals. Power, renewable energy, we have good proposals. Advanced smart metering, this is one area which is picking up very well in the country, so there we have taken a lot of good proposals now, then in IT, we have taken good proposals under that. In fact, in the real estate sector also, lease rental discounting, then in the real estate also, in IT is coming, so that also we have initiated some one or two proposals. Food processing, so I think very diversified field in the corporate areas we are there. What we are focusing on improving the turnaround time of the sanctioning of the loan.
That is one commitment which we have given to all the corporates that any proposal which comes to head office with all the waiting and everything, head office sanction will happen within fort night, within 15 days. This is one comfort we are giving to all the corporates. Based on that, I am seeing a lot of the interest in our bank from the corporate side. I'm very confident that going forward, you will see the good growth. We are still sticking to the guidance which we have given. I think we are going to grow at the same speed.
Thanks, Ashok. Good assurance on the TAT, actually, because technically the TAT is not being followed strictly.
Please rejoin. Thank you. Mr. Ashok, I would request you to please rejoin the queue as there are several participants waiting in the queue.
All right.
Thank you very much and all the best to you, sir. Thank you.
Thank you.
The next question is from the line of Mahrukh Adajania from Nuvama. Please go ahead.
Hello. Good evening, sir. Sir, I have a couple of questions. Firstly, in terms of margins, so most banks are guiding to some sort of a recovery or stabilization in the second half. So that may have been well understood. But in the second quarter, how much do you expect margins to fall? Will it be more than 11 basis points that we have seen in the first quarter, or will it be lower or higher? A rough ballpark would really help.
Yes. I think Q1, you have seen that domestic NIM is 2.84%, and overall, the global NIM is 2.70%. Our guidance is 2.80%-2.90%.
Now, specifically, if you can talk about the Q2, I think we will be holding to the same level which is there in the Q1 because the interest rate cut which has happened, that impact already we have seen in the first quarter. So Q2 also will be having the same level. And we have also improved the advances portfolio. More than that, we have sold around 21,000 of the corporate low-yielding book. So I think that also will give us some good income. And definitely, our NIM, what we have done in this particular quarter, I think we are going to hold on to this level now, around 2.7%.
Sir, because the last repo rate cut would have been passed only for less than a month, and the full impact will come in the second quarter. Even then, you would see NIMs holding on?
Yeah.
Two things which are in favor now. One is the corporate mix in overall loan growth has also happened. And second is, since we have shed some low-yielding advances, that is also in our favor. Third point is that we have also reduced the cost of deposit. And that impact also we are going to see in this entire full quarter because the cost of deposit, the rate reduction in the deposit also happened subsequently, I think, in the second month of the Q1. So that impact also we have not seen fully in that particular quarter. So this particular quarter, we are going to see that entire impact on the cost of deposit also. So all those things put together, I'm expecting that definitely 2.70, definitely we are going to hold on.
Got it. And the MCLR has been cut by how much, sir?
We have already reduced by 15 basis points. We are 9.05, and today we are at 8.90.
Okay, sir. Sir, and my next question is on MSME loans. So some lenders have called out stress in the MSME segment. What are your thoughts? Some lenders, sir? Called out stress. So they're saying that NPLs in MSME, of course, they're saying unsecured MSME, but they're rising.
We are not seeing any such movement or any such change in our portfolio. And I think the way the book was behaving earlier, the same way it is behaving now also. And the phrase underwriting which has happened for the last four years, in that incremental MSME growth, we are seeing slippages of around 2.5%-3%.
Okay, sir. And do you do any unsecured loans to MSME? How does it work?
No, we don't do that.
We don't do that because there are two ways of doing the MSME loan. One is that CGTMSE coverage is available. So wherever the collateral security is not there, we advise our people, advise the customers to go for the CGTMSE coverage. So either it is CGTMSE coverage or the collateral securities are there.
Okay, sir. Thank you so much. Thanks.
Thank you, madam.
Thank you. The next question is from the line of Kunal Shah from Citigroup. Please go ahead.
Yeah. So firstly, the question on SMA, I think that was again missed out. So if you look at the increase in the SMA pool which is there in the MSME, maybe when you look at it overall in general, it has gone up maybe a bit. Say when you look at it, even Agri, there is SMA pool which has got built up.
So how do we read this number of, say, closer to 1,600-odd crores of SMA? And this is again more than 5 crores. If you can highlight the overall SMA pool, say, even below the 5 crores which you always used to give out, say, SMA 0, SMA 1, and SMA 2.
See, I can give you the full SMA 0, 1, 2 of the entire bank irrespective of the amount. See, it was 6.79% last year. Okay? And now that has come down to 6.14%. And that includes from ₹1 to the ₹1,000 crores now. So that is the book. And I think there is a good control on the SMA book. And now for the 5 crore and above, it is only 0.14% is the stress is there in the 5 crore and above book.
Okay.
How would have been this breakup across SMA 0, 1, 2?
You want the absolute.
Absolute numbers. Yeah. Yeah. Absolute and percentage. Yeah.
Absolute.
Give that every quarter. Yeah. Yeah.
Retail, we have 28,000 crore.
Okay.
And Agri, it is 11,600 crore. MSME, 24,000 crore. And all others, like corporates and all put together, it is 5,200 crore. This is the total stress. This is total.
Yeah. Yeah. And 0, 1, 2 in particular, overall amount, including all the portfolios. So like say SMA. Yeah. Hold on. Yeah.
See, this is the total around 69,000 crore is the 0, 1, 2 book is there now. In that, SMA 0 itself is 43,000 crore.
So that is down. Yeah.
I can tell you the trend which is there. Most of this, the 43,000 crore, in that, retail itself is 17,800 crore.
So what happens, the vehicle loan, housing loan, even for one day also, if it goes, it becomes the SMA 0 now. And within one week of that, it again, the repayment comes and it comes out of the SMA 0. So SMA 0 is 43,000. SMA 1 is 13,200 crore. And SMA 2 is 12,700 crore.
Hello? I think the participant has been moved from the queue. I will now move to the next question. The next question is from the line of Piran Engineer from CLSA. Please go ahead.
Yeah. Hi, sir. Congratulations on the quarter.
Thank you.
Even question. Hello. 638 crore. Yes, sir. Am I audible?
Repeat, please. Yeah. Now you can repeat, please.
Yeah. Yeah. So, sir, last year, our slippages in MSME were 638 crores. And now it is 966. And it has been above 900 crores for the last two quarters.
It's on an increasing trend. So what exactly is happening on the ground?
See, this slippages which has happened in the MSME is 10 lakh and below category. And most of these loans are under the Mudra loans for which the government guarantee is also available. 75% of the outstanding, we are going to get back in that particular category. So that is the only slippages which is happening. Otherwise, MSME book, 10 lakh and above is fully behaving well. We have a good underwriting. The structure is there. And 10 lakh and above, we have a centralized setup at 138 centers in the country. All those proposals come under that MSME cell. And there only the processing and disbursement happens. So I don't see any challenge in this entire book.
And so the sourcing for this 10 lakhs and above happens through specialized branches or your regular liability branches?
Oh, it is happening through all the branches. But now we have initiated the digital sanction of up to 10 lakh now. And this we have initiated just two months back. And another two, three months' time, manual sanction and disbursement up to 10 lakh category is going to be totally stopped in the bank. All those Mudra loans up to 10 lakh will happen through the digital system itself. And we have done these digital loans in the different categories. And those loans are sanctioned by the digital setup. The BRE is so strong. It behaves. The book is behaving very well. So going forward also, maybe another two, three months' time, the entire 10 lakh loan, all those Mudra loans will happen through the digital BRE now.
Okay. Okay. And sir, our employees go on the ground and source these loans or we get it through DSAs?
No, no, no, no.
A customer walks into the branch with these proposals?
There are two things. One, the customer walks into the branch. The branch itself, they source the proposals. There is no DSA or third party involved in these Mudra loans.
Okay. Okay. Okay. Understood, sir. Sir, just one other question on OpEx guidance for FY26. This quarter, it was INR 8,700 crores. What will it be for the full year approximately if you can guide us?
I think if you see the operating profit, we have this quarter, we have posted the operating profit of INR 7,000 crores. And I'm very confident that going forward also, this trend will continue.
No, sir. I'm saying operating expenses, not profit.
Operating expenses also, it is yeah. This particular quarter, there is one head that is the priority sector lending certificate. That is the PSLC.
Because of the shortfall in the priority sector, we go to the market and purchase that to achieve that priority sector target. Because of that, only in this particular quarter, there is one upscaling is there in the operating expenses. Otherwise, we have stabilized operating expenses both in the employee side also and other than the employees' expenses also. So I don't see any big changes going to happen in the operating expenses.
Okay. Okay. Okay, sir.
Yeah. In the Q4 also, our operating expenses were 8,697 crores. And Q1 of this also, it is 8,765 crores. So we are almost in the same range except that one head where we have said around 800 crore PSLC certificate. For that only, some of the cost has gone up.
So now if I remove that 800 crore PSLC, it will be roughly 8,000 crore operating expense.
So I assume that level for the rest of the year?
INR 8,000 to INR 8,200 crore.
INR 8,000. Okay. Okay. Okay. So this was very useful. Thank you for answering my questions and wish you all the best.
Thank you.
Thank you. The next question is from the line of Yan Gao from Schonfeld. Please go ahead.
Hey, congratulations on all those numbers. Just on margins, do you mind sharing with us what's number one, the recovery or return of debts in the interest income line? And also, how much is tax refund, interest on tax refund this quarter?
Yeah. Recovery in technical write-off and the interest, all put together is INR 1,694, INR 1,700 crore. And the tax component is around INR 550 crore. INR 500 crore.
Sorry. The INR 1,700 crores, how much of that is in the net interest income?
Interest income is, see, INR 1,200 crore is the technical write-off recovery.
And 500 crore is the interest recovery.
So we have 500 crore interest recovery and another 550 crore interest on tax refund.
Yes. Yes.
Thank you so much.
And this 500 crore in the interest recovery, in every quarter, we are recovering in the interest to the extent of around 500-700 crore. Every quarter, that figure is there.
Got it. Thank you so much.
Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to one or two per participant. Should you have a follow-up question, we would request you to rejoin the queue. The next question is from the line of Bhavik Shah from InCred Capital. Please go ahead.
Hi, sir. Thanks for the opportunity. And congrats on good set of numbers.
Last quarter, we had AS-15 provisions of around 1,400 crores. And this quarter, it is 1,150 crores. Is it fair to assume it will stabilize at this run rate for the entire year?
Yes. Yes. We have taken the calculation from the actuary. And based on that only, we have factored this. I don't see that in any of these quarters, we are going to exceed this amount.
Okay. Okay. Thank you, sir. And sir, our net worth has increased by 4,600 crores, while our PAT was around 1,600 crores. Can you explain as in the walkthrough of what goes into that 4,600 crores?
Yeah. Net worth has increased. The revaluation counts. Yeah. One element is there in that revaluation we have done. And that figure has also because of that, it has gone up.
So what would be your outstanding AFS reserve?
Outstanding?
Yes. AFS reserve.
So revaluation would have gone to the AFS reserve, right?
Yeah. Yeah. AFS reserve. Yes. Yes. It will go to the AFS.
One minute. Just a little bit.
Yeah. It has gone to 800 crore now.
So that's the outstanding AFS reserve?
Last year, yeah, last year in the same quarter, it was 33 crore. It has gone to 800 crore now.
Okay. Okay. And sir, we have 10 lakh crore of term deposit. In that, how much is the bulk deposit, about 3 lakh crore?
That figure is around 2.5 lakh crore. You have that exact figure, no? Yeah. 2.8 lakh crore.
2.8 lakh crore. And sir, this would be at what average rate? 6.5, 6.4, or more than that?
These are all at different rates. And yeah, because all these are taken at a different period and different rate.
So it's very difficult to crystallize at what rate it is there. But now the bulk deposit rate itself, 100 basis points, we have brought it down now. Because last quarter, means Q4, it used to range between 7.8%-7.85%. Now the bulk deposit rate is around 6.7%-6.78%. And we are not there in the bulk deposit market also. PNB is not there in the market for the bulk deposit.
So will it materially reprise next quarter again?
Mr. Bhavik Shah?
Yes. I'm sorry to interrupt.
Yeah. Yeah.
Definitely.
Okay. As in, I just have last question if I can squeeze in. Sir, as in, we saw a standard provision of 300 crore this quarter and a write-back from investment of about 400 crore. If you can just explain as in what were those for, that would be great. Thanks. And I'll stop there.
See, standard account provision, yeah, whatever we do at the 7th June circular, there was one account which was triggered under the 7th June. And because of that, we have made some additional provision.
Okay. And the write-back from investment?
Yeah. 400 crore. Because of the, yeah, because of the MTM and the RRBs and all, which the amalgamation has happened. So again, the valuation has happened. And because of that, there is some write-back is there.
Understood, sir. So thank you, sir. And yeah, best of luck for future quarters.
Thank you. The next question is from the line of Vansh Solanki from RSPN Ventures. Please go ahead.
Hi, PNB Management Team. Very good to speak to. So my question is on asset quality, mostly on credit costs. That credit cost for this quarter is around 14 basis points, okay?
In last four quarters also, we see there's a similar range of 10 to 20 basis points is going on. And you have given guidance of the 50 basis points of the credit cost. So can you think that this 10 to 20 basis points range for a credit cost is normalized? Like you can lower the guidance of the 0.50%? Is there chances? Is this a normalized range or what?
Credit cost guidance which we are given is 0.50% for the entire year, right? And in this particular quarter, our credit cost is 0.14%. And we will remain well below the 0.5%. I think that is the assurance I can give you.
Okay. Okay. And can you just mention the sanctioned book which you have mentioned first? But I just the segment breakdown. Can you just mention again?
Yeah. Yeah. We have 129 crore of sanctioned book under the corporate segment.
And in that, 43,000 crore is the sanction which we have done up to March 25. 48,000 crore sanction which we have done in this financial year. That is the first quarter itself. So both put together, 91,000 crore is there. And 38,000 crore is the sanctions is in the pipeline which we are going to do it. All put together is 129,000 crore is the book which is there with us now for which the disbursements are going to happen.
Okay. Okay. Thank you, sir. And best of luck for the future.
Thank you.
Thank you. The next question is from the line of Tarak Thakkar from Fort Capital. Please go ahead. Mr. Tarak, please go ahead. As Mr. Tarak is not on the line, I will request to move to the next question. The next question is from the line of Sushil Choksey from Indus Equity Advisors.
Please go ahead.
Sir, congratulations on Team PNB for very stable and good guidance. Sir, my first question is your RAM advances is visible at 17-18%. How do you visualize here on RAM advances and what is the current rate?
See, within the RAM, if you can share some figures, MSME has grown by 18.6%. And core retail has grown by 17.7%. Bank has initiated a lot of things in that RAM now. One is that massive outreach activity is happening in our bank where from the top management, including MD and EDs and everybody is participating and they are visiting the centers, conducting the outreach activity. And this is happening for the retail, agri, MSME. Just on 25th of March, 25th of July, we have conducted the MSME outreach activity. 11th of July, we conducted the agri outreach activity. And 17th July, that was for the retail expo.
So these activities are generating a lot of good leads. And then the leads are getting processed at the centralized hub and getting sanctioned now. This we have seen in the last quarter also. And those leads got converted. And it has given a very good growth in this RAM sector now. So this activity is going to continue. Second, we are bringing a lot of digital footprint in the RAM sector now. So all those things are going to facilitate. One is that improving the turnaround time. And second, the penetration and outreach activity, visibility of our bank that we are also a very serious player in the RAM sector now. So all those things put together, I am expecting that there will be very good growth under the entire overall RAM.
So what are the yield on RAM, which I'm asking, sir? Yield on RAM?
Yeah.
The MSME, the separate figures are there. Like for retail, it is varying in the range of around 8.6%. Agri, it is 8.82%. MSME, it is 10.14%. And it is above 90%. Yeah.
Okay. Sir, based on your INR 129,000 crore of sanctions, which is more of project demand to pipeline, where do you see your CD ratio at the end of the year? And what would be the balance between corporate and RAM at the end of the year?
The share of corporate and RAM will be with the initiative. I'm expecting somewhere around 58%-59% under the retail and remaining 40%-41% under the corporate.
Okay. The initiative is the bank is taking specifically on digital and empowering the RAM sector with a lot of digital initiatives to improve your tax and a lot of other initiatives. What is the digital expenditure to incur for this year?
And if any plans to incur additional expenditure to improve the benefits to PNB account holders from various initiatives on types of touchpoints, any other measures?
See, first, the benefits which we have given is despite the stress on our income, we have waived the minimum balance charges. Now there is no minimum balance charges. Whatever categories accounts have been opened, even if it goes below that level, it is totally free. No charges on that. Second, for entire CASA product, whether it is a salary or non-salary, senior citizen, youth, women, farmers, for the military people, we have come out with the special scheme. And in every such account, we are providing some add-on facility like health checkup facility free, insurance, term life insurance free, one crore accidental insurance is free, OTT subscription. So many things we have built in along with that account.
And all these things are being passed on to the account holder when he opens that account with us now. So these are the things. Third point is the digital initiative like our PNB mobile app. It is such a wonderful app that if you are opening an account and if you download our app, you need not visit the branch for any banking activity. Everything is possible and hassle-free now. So I think these are the benefits that are there for anybody who is banking with PNB.
So what is the external initiative?
I'm sorry to interrupt. May I request you to rejoin the queue? There are several participants waiting in the queue. Thank you. The next question is from the line of Roshni Munshi from CLSA. Please go ahead.
Hello. Thank you, sir. Thank you for the opportunity. Good evening.
My first question is, I just wanted to check if the benefit of 100 basis points of repo rate cut has been completely transmitted to the borrowers so far?
Yeah. It has already been passed on. In fact, in our bank, there is a guideline that today, if the MPC decides to rate cut and if it is announced by RBI, I think the next working day itself, it is getting implemented straight away.
Got it. Got it. Thank you so much. And also, one last housekeeping question. Could you please tell us the MCLR, EBLR, and fixed-rate loan mix?
Yeah. We have around 56% linked EBLR. Putting our repo linked, treasury linked, that composition is around 56%. Remaining all is the fixed-rate, Base Rate, and the MCLR.
Okay. So 56% is EBLR. And everything else, you will just like to classify it as MCLR, fixed-rate, and all.
Okay. Yeah. Yeah.
Yeah. Yes. Can you elaborate how much is MCLR if that's possible?
MCLR, rate if you want, rate of interest?
No, no. What percent of the mix is MCLR?
MCLR is 30%. 30%.
Got it. Thank you so much, sir. Thank you.
Thank you.
Thank you. The next question is from the line of Harsh Modi from J.P. Morgan. Please go ahead.
Yeah. Hi. How would you characterize the impact of change in PSL norms on your bank's earnings? And how do you expect that going forward?
PSL norm, you are talking about the changes which have happened in the housing loan and other segment, right?
Yeah. And the expectations of further changes. There are some proposals.
Yes. Yes. Yes. See, one change which has happened. I think a very marginal improvement has happened because of the housing loan project, the revisit has happened.
So let us see what other changes are being proposed and how it gets implemented. I think we need to wait and see. Generally, I can react that what are the final benefits that are going to come to the bank.
All right. Thanks.
Thank you. The next question is from the line of Jai from ICICI Securities. Please go ahead.
Yeah. Hi, Ashok sir. Good evening. And thanks for the opportunity. Sir, first question is on bulk deposit. Like last quarter and this quarter also, we had 2.8 lakh crore of bulk deposit. Because this deposit is going to be short-tenured, have you seen the significant repricing in the Q1? I mean, have you started seeing benefits on the bulk deposit repricing? And if you can quantify how much interest saving can happen in Q2?
See, the bulk deposit already around 100 basis point dip has already happened in the system, and in our bank also, the same thing is there. Because earlier, the bulk deposit was in the range of around 7.85%-7.9%, which has come down to 2.7%-2.75%. Sorry, 6.7%-6.75%. So almost 100 basis point dip has already happened. And definitely, the impact of that, it will be visible in our bank also from the Q3 onwards. Real impact will be visible.
Okay. Sure, sir, and then interest cost, right, in this quarter, I mean, one is a small number. So you have two, three components: interest on deposit, interest on others, and RBI others. So there is some sharp INR 200-300 crore decline. Interest paid on borrowings. Have we retired these borrowings? Or so INR 500 crore has come down to INR 193 crore.
Or this maybe this is going to go back to 500 crore. Because the third line item is more or less similar at 800 crore. But there is a dip in the interest paid on borrowings.
See, this borrowing happens in the market also, in the treasury market on the day-to-day activity when we borrow. That amount has considerably come down in this particular quarter. Because we had the liquidity surplus, so we were not borrowing in the market.
Right. Okay. Sure. And lastly, sir, the yeah. Sir, last question is actually your global margins and domestic margin, right? Your global book is less than 5% of overall book. But still, it creates a 10 basis point impact on the overall, 15 basis point impact on the overall bank. It looks like that the overseas margins are like 0.5% or even below. Is that the math or because this?
You are absolutely right. It is in the same range. It is in the range of around 0.45%-0.50%. I think we are revisiting our strategy. And we will see that because finally, outcome has to be that how it is going to improve my NIM. So we will revisit that. Portfolio is very small, but definitely, it affects my bottom line.
Right. And sir, if I may ask one more question on retail loans, right? So A, if you can give the you have INR 2 lakh crore of retail, core retail, within which you have given for housing, education, and vehicle loan, but still there is some INR 70,000 crore others, right, which could be mortgage or personal loan or something else if you have that number of that breakup. And you had that strategy of growing in-house retail, right, versus the DSA or versus full buyout.
How is that strategy shaping up? Thank you.
No, that has picked up very well. And if you see the housing loan growth within the entire retail, it has grown more than 17% YoY.
Right. So that is the yeah. Okay.
And it's got for project approvals and improving the turnaround time thereby.
Right. And if you have that number, sir, retail book breakup, that will be the last thing that you can provide during the quarters.
I can give you. Housing outstanding is INR 106,000 crore. Vehicle is INR 27,000 crore. Education is INR 8,500 crore. And mortgage is INR 16,400 crore. Personal loan INR 22,500 crore. Gold loan INR 3,400 crore under the retail segment. Credit card INR 1,200 crore.
Sure, sir. Thank you. And all the very best.
Thank you.
Thank you. The next question is from the line of Nitin Aggarwal from Motilal Oswal. Please go ahead.
Yeah. Hi. Good evening, sir.
I have a few questions. One is on the PSLC expense that we have incurred this quarter, so can you talk about as to what steps bank is taking to ensure that we don't incur a PSLC shortfall in the following years? Because some of the PSU banks are making really decent income on the PSLC certificate that they are selling, so why is PNB sort of missing out on that front, and what are the steps that you think that will help us?
We have taken a lot of steps now because I know that many of the public sector banks, they are making money out of this, and bank like ours having 10,200 branches, we were missing out, but this year, massive activities have been started, and the self-help group, one segment which takes care of the small and marginal farmer category also.
The 40%, the agriculture target of 18% also, it falls under both these categories. And there only we are missing the target. We are going in an aggressive way for the self-help group, the onboarding now. Benefit of self-help group is one is that yield is also very good. NPA percentage is just around 1%. And the women, the financial inclusion point of view also. This is one segment we are going in a very aggressive way. If you see the figure, the YOY figure under the self-help group, almost 4,000 crore has been added. It was 8,500 crore last year by June 24th. Now it is 12,000 crore plus now. This is one segment which we are going to do it in a very, very big way.
Even for the farmers also, the KCCs and more, we are going to focus on the food processing, rural godown, the cold storage, so a lot of activities which we have started, and I am very confident that going forward, we have already created a roadmap for totally coming out of the PSLC purchasing, and within three years' roadmap, I think we are going to come out with this entire PSLC borrowing from the market. Next year itself, I am expecting that to the extent of around 300 crore, we are going to save from the income side now with the initiative which the bank has taken under the RAM segment.
Right, sir. That's very good to know.
Sir, secondly, some qualitative color around treasury because this quarter we have seen most banks reporting very strong treasury gains and benefiting from how the bond yields moved, the OMOs, and other things. So any qualitatively, can you talk about as to what can we expect in the second quarter around treasury? Can there be a sharp fall versus what the first quarter has been? Or is there more room that you still see for PNB or for other PSU banks space as a whole that they can sustain this run rate? Any qualitative color around that?
Yeah. Since our bank, we have built in a very good strong treasury book to the extent of around INR 5 lakh crore is our treasury book. And already the reducing market scenario when the interest rates are falling, definitely the treasury book is going to behave very well.
And not only this quarter, this quarter definitely we have made good money. I think going forward also, in the entire this financial year, treasury book is going to support in a very, very big way in the operating profit.
Okay, sir. And sir, lastly on the business growth and particularly on CD ratio, so we have seen some banks like unwinding their deposit book. And the CD ratios for many PSUs have increased now to somewhere early to mid-70s%. So while PNB continues to deliver a very stable growth, maintaining a balance between credit and deposit growth. So what are the thoughts on that front? And will we look to utilize the room that we have?
Yeah. Yeah. Yeah. We will continue to hold on to this level now. Rather, we are expecting that there will be some improvement in our CD ratio. Right now, around 71.28% is there.
I'm expecting by end of this year, somewhere around 73%; definitely we should be able to touch that. But growth in the deposit and the advances are very, very stable. And the activities and the initiatives the bank has taken, I'm very sure that there will be good credit growth. And the CASA initiative which the bank has taken, I'm expecting that there will be very good CASA. And within that CASA, there will be stable SB individual growth will be there in the bank.
Right, sir. Thank you so much and wish you all the best.
Thank you.
Thank you. That was the last question for the day. I now hand the conference over to the management for closing comments.
Thank you very much. My only submission is that since in this particular quarter, we have migrated from the old tax regime to the new tax regime.
That is the reason the impact which we are seeing on the net profit. If you see our PBT profit before tax is 6,758 crore, which is 28.3% YoY growth is there. First time, we have crossed 7,000 crore of operating profit. Going forward also, this trend is going to continue with the lower tax regime when the 10% tax we are going to save. With that itself, 700 crore every quarter, we are going to generate the net profit. We are very bullish that going forward, the migration which we have done, and we have taken a very conscious call because whatever MAT benefit was there, we had nullified everything. This was the right opportunity and right time for us to migrate to the new tax regime.
So we have taken a very conscious call which will have the benefit on our ROE going forward. I think all of you should believe in these things. And definitely, I think the trust which you have imposed in our bank, I think this should continue. From the management side, we are committed for the growth. We are committed for the bottom line and for the asset quality. Thank you very much.
On behalf of Elara Capital, that concludes this conference. Thank you for joining us. And you may now disconnect your lines.