Punjab & Sind Bank (533295) Earnings Call Transcript & Summary

Good evening, everyone. I'm Ganesh Shankanawar, the moderator for today's earnings call. I welcome and thank each one of you for joining us today for the Punjab & Sind Bank's Earnings Call for Q1 FY '27. Please note that this conference is being recorded [Operator Instructions] I would now like to introduce the management of Punjab & Sind Bank. We have with us today, Shri Swarup Kumar Saha, Managing Director and Chief Executive Officer; Shri Ravi Mehra, Executive Director; Shri Rajeeva, Executive Director; and Shri Arnab Goswamy, Chief Financial Officer. I would now like to hand over the conference to Shri Swarup Kumar Saha, MD and CEO of Punjab & Sind Bank for the opening remarks. After which, we will have the forum open for the interactive Q&A session. Thank you, and over to you, sir.

Thank you. Good evening, all. Welcome to this analyst con call on the Q1 performance of Punjab & Sind Bank. I'm thankful to all of you for having joined this con call. The Board adopted the Q1 results on Saturday, and -- on 18th and the presentation and the press release have already been uploaded. So I'm sure many of you must have gone through the bank's figures. But just to set the context, I'll just mention a few of the highlights of the bank's performance of Q1, and then we'll open up the discussion for the Q&A. So overall business grew by 15.27% and stands at INR 266,420 crores. And it was spread between our deposit growth of over 12.16% and advances of 19.35%. So the bank was able to grow consistently over the last few quarters. And this quarter also, the bank has registered 19.35% growth in credit. And this has been reformed across all segments. The retail grew at 36%, agri grew at 25% plus and MSME over 22%. So the advances has knocked us 60% of the total book as we have been talking on this subject. In terms of the deposits under CASA, it grew at 10.2%. The retail deposit grew at around 15%, 14.94%. The core fee income grew at 13.89%. One thing -- one factor, which has been very positive in the Q1 results of -- this time has been the increase in the net interest income by 15.33% Y-o-Y. I think that's a sign that the bank is now going ahead with the -- after the adjustments of the repo rate cut, et cetera, and has been now been moving forward on the net interest income front. So the operating profit was flat but -- at INR 545 crores. But the important point is just that the operating profit has been maintained in spite of -- in the fluctuations in the treasury gains based on the obvious reasons that has been playing in the market. So if we compare ourselves in that way compared to the previous quarter of June '25, then you'll find that the contribution of the operating profit in Q1 last year was -- to a large extent, supported by treasury income, around INR 200 crores and recovering return of accounts of INR 109 crores. Against that, this quarter, in which we just concluded, the contribution from the treasury came at INR 80 crores, and the recovery in accounts was slightly lesser than Q1 last year. So in spite of these lesser noninterest income, in Q1, the bank was able to maintain the operating profit of Q1 last year and also Q4 last year. So that's a point that we would like to make. The net profit grew at 23% plus -- 23.05% and stood at INR 331 crores. The asset quality continues to improve. We are now at 2.21% of gross NPA, 0.65% of net NPA. PCR also shown improvement of 92.33%. Slippage issue is broadly contained -- has been broadly contained. This cost-to-income ratio has dipped to slightly to 60.21%. Overall, the advanced mix continues to be spread across all the three segments. We have been always saying that RAM advances would be our key going forward. So in terms of retail, we -- our portfolio now stands at 25.82%, agri portfolio stands at 13.38%, MSME portfolio at 20.82%. MSME are showing a good growth continuously. In this way, this quarter also, we grew at over 32% in the MSME segment. Overall, the -- in terms of the rating profile of our corporate accounts, in terms of NBFCs, most of the, in fact, nearly all entire portfolio is A and above, with AA and AAAs are constituting about 92% of the total portfolio. In terms of the external rating of the other corporate borrowers, the BBB and above is 67.83% and government guarantees 14.88%. So nearly 82% is covered by government guaranteed or BBB and above. So the health of the credit portfolio continues to be robust. And the capital adequacy now stands at 17.61%. It's still at a healthy level. As I said, we have given a lot of focus on core fee income, and it is -- continues to rise. This time also, the core fee income has increased by 13.89%. And we have taken various steps to work on this direction so that we have now set up a target of INR 900 crores to INR 1,000 crores of core fee income in the current year annually. Our collection efficiencies remain to -- continues to improve. We are now at 95%. Slippages are broadly in line of the previous quarters. This time, the slippages are at INR 207 crores. We -- stripping ratio at 0.18% of the quarter. So overall, I realize it will be around [ 47% ]. So we are on track there. The overall SMA1 and SMA2, which we show has also showed improvement. Our endeavor is to bring down the SMA total percentage to less than 3% going forward. We have one or two government -- state government-guaranteed accounts, which fluctuates. But it is -- this time, it is out of SMA1 and 2. But apart from that, overall, if we take out the 2 state government-guaranteed accounts, we are broadly in line with the other normal accounts of SMA. So that's an area where we are working on. And as far as -- we continue to give focus on branch expansion. Network expansion through business correspondents also covering districts as we go along. Various initiatives are mentioned in the presentation on digital and various new areas of where we are bringing -- a lot more and more digital initiatives in the bank, whether it's payments gateway, whether it is online bank -- generation. We are the first public bank to provide this facility. Digi gold loans, CVDC will get launched shortly. We have an excellent salary product, both the central government and the state government employees in terms of Bharat Connect Vista and Bharat Connect Omni. As far as the -- finally, as far as the guidance is concerned, we have whatever guidance we kept for the -- initially after the close of last year, we are broadly in line with that. Deposit growth was slightly below the 13% to 14% range. We will maintain that. Advanced growth was 16% to 18%. We have crossed the -- we have been able to maintain and suppose the guidance. Ramp percentage, we said at the end of the year, will be about 60%. So we are already at 60%. Our endeavor would be to bring it to 64% to 65% by the end of the year. Gross NPA is on track. Net NPA already on track. And all the others, PCR, recovery of rotation credit cost and strip ratio. So we are broadly going to achieving the numbers which we have guided. So -- thanks for giving me the opportunity. This was all from my side. I now would like to have the question and answers as it comes. Thank you.

Thank you, sir. we will begin the question-and-answer session.

[Operator Instructions] So first question we have from Ashok

Compliments to you, sir, and Rajeeva and the entire management of the Punjab & Sind Bank for managing the business on the annualized basis very well. I mean you surpassed all your targets given 15.27% overall business, credit 19.35% and the deposit is 12.16%. Commendable. But sir, if you look at the quarterly performance, though the first quarter is a little subdued. But this time, we have seen that most of the other banks who have declared results so far, even the first quarter also on the credit front, especially has been very good. So suddenly, the overall credit targets are even improved by many of -- improvised by many of the -- some of the other banks. But we are -- overall business only 1.05% credit, 1.25% -- deposit 0.89%. So going forward, how do you place our banks in the committee of -- along with the other banks which are talking about now 16%, 18%, 20%? So we were high on the annualized basis. But now this FY '27, how do you see -- and where do we reach? And how do you plan to reach there?

Yes. Thank you, Mr. Ajmera. I think pertinent point regarding credit growth, if you observe that the credit growth is back in the system now. All the banks are now showing healthy growth in the credit portfolio. As far as the -- your observation regarding the Q-o-Q variance of business and advances, while Q1 is always for our bank, in terms of performance, we try to pace our bank's growth on a Q-on-Q basis. And therefore, on -- if you observe that the bank's overall guidance still remains at 16% to 18%, okay? And if you observe some of the other banks' growth -- now we are projecting, we are now projecting at 16% to 18%, which we have already envisaged in our strategy. And we have also gone beyond the guidance that we have gone in terms of advances at least. So we feel that the overall growth story of the bank in terms of credit will be our -- we'll between 18% to 20% going forward. And notwithstanding the issue of the quarterly sequential growth, we don't feel that's a challenge. We have enough We have undisbursed sanctions around INR 15,000 crores. Our -- we have done a lot of work on the digital asset side. Our branch activation has improved. The contribution from the branches in terms of RAM credit has now grown significantly. So overall, the focus, of course, would be on the RAM segment. As I said. We'd like to bring this 60%, take it up to around 65%. And we are working on each of the three segments: Retail, Agri, MSME. Particularly on the segmental part, we are working very -- we are getting proud of positive results on food and agro processing, that's a champion sector for the bank internally that we have created. And I think that's the area where we will be working very, very closely. Going forward, it is giving us a lot of traction. A lot of -- on the retail front also, we are now having digital gold loans. We have enabled that. We have also now simplified processes of digital loan against FDs, fixed deposits. Very shortly, we are going to launch the loan against mutual funds. So that too digitally. Of course, other granular products, housing, car loans, GST loans, all are very, very appropriately being done. So that encourages us that we are now both organically branch network-based growth and also digital enabled growth. So personal loan, again, yes, one area where we are now at par with the industry is that we have now created a digital personal loans, STP journey also. So keeping all these things in mind, and the -- some of the other new initiatives also are on the pipeline that will let you know once it is in-place maybe in this -- after second quarter. So we have -- and we are also doing for lending. We have a specialized cell on co-lending, which does a lot of hard work in terms of -- in terms of recording business. So overall, though we have kept a guidance of 16% to 18%, we have achieved 19% plus. We feel that a 19% to 20% book is very much possible and as per risk appetite as well.

That's very encouraging to hear, sir. Sir, on the profitability front, if you talk about the net profit this time is much lower than the last quarter, maybe because of that provisional reversal negative provisioning in the last quarter of INR 73 crores. But if you look at even the other income, the other income is also down INR 333 crores as against INR 427 crores. And major contributor in that is -- negative contributor is less recovery from the written-off accounts of only INR 80 crores as compared to INR 230 crores -- INR 238 crores in the last quarter. And even the cash recovery also is lower in this quarter. Our NPA provisioning also has gone up to INR 133.5 crores from INR 20 crores in the last quarter. So all this is giving a lot of pressure on the profitability because treasury has grown by INR 40 crores as compared to last quarter. But then treasury, otherwise also in every bank in this quarter have performed well because of the rate tweaking. So -- on profitability front, going forward what are the plans of the banks? And where are we going to end this FY '27?

So -- yes, point will be taken. Can you hear me? Am I audible? So point well be taken, Mr. Ajmera, regarding your observations on the noninterest income. If you see sequentially, regarding the treasury income, as you rightly said, the treasury income has improved for many banks. And for our bank, if you compare that with March figures, we were actually having a negative contribution in March. Now that is positive. And of course, tends to be movement in the yields that have happened. And that's an area which will always be there in a way the fluctuations in the yield moment. And again, things are hitting up in the in the Gulf area. So we have to wait and see how it pans out going forward. And of course, return of accounts, we -- it's a first quarter. We have though it has been marginally less than the previous quarter, but it's all based up, always recovery things happen on a yearly basis more means on the Q3, Q4, the second half of the year becomes much more crystalize, many things get pledged. So therefore, we have a very ambitious plan of recovery and upgradation, including that, of course, in the written-off account. So beyond that, what we'd like to say is this that we all know that the importance of this treasury income and recovery in TW accounts. So therefore, as I said in my opening remarks, much of it -- this will be a market phenomena. Treasury will always be a market phenomena. So now if you see our NII income, I think that is what we are trying to mitigate. We are trying to mitigate our income growth through more and more high income -- investing in high-yielding assets, whether it is advances, whether it is investment. So one strategy is, of course, to improve our yields from the -- particularly the Agri and MSME segments. And under the retail schemes on the gold loan, on the mortgage loan, on the personal loan, these are some of the areas which we will be -- we'll continue to focus, and that's why we have created a lot of digital journeys so that the augmentation of the credit in this area also improves. And the other area which remains, of course, will be other income apart from the Treasury and the written-off accounts, which we are now working.

The higher NPA provisioning?

That will come. I'm coming to that point. So other income, of course, as you -- as we have been...

Your voice is in between breaking, sir.

Why? That is not supposed to happen. Now is it okay?

Hello, moderator, I think sir's voice is breaking.

I can hear you clearly. Clearly. Is it now okay? Shall I continue?

Is it the net? Yes, sir. Now yes, now I can hear you. Between your voice had gone. Yes.

Okay. So now, as I said, in core fee income, we have been doing A lot of activities in terms of rationalizing service charges, system-driven system-driven charging of our service charges. We have created a revenue intelligence wing in the bank, so that it gives us continuous feedback on how to improve our income. And coming to your final point on the provisions, actually, what we have done this time -- slippages have been at par with the previous quarters. This time, as the ECL provisions are kicking in next year. So we have proactively started building up on that front as well. So the additional provision that you see is actually not due to any adverse movement in the asset quality, but due to proactive creation -- proactive building of ECL provisions and more than what is currently required so that at the end of when it is -- when it kicks in on 1st April, we are in a better position in terms of that. So we thought it is better to fundamentally strengthen the balance sheet. And that's why you will find that this time provisional coverage issue has also improved to [ 93.2% ]. So that's just the answer for you for your additional provisioning is not that we have -- credit cost has increased due to some asset quality issue, but due to proactive provision -- providing for in the NPA portfolio.

Sir, one last thing, observation and one question also that now with this FCNR deposits and I mean the interest-free regime now. And our bank also, we must be having a lot of customers -- NRE customers and the foreign customers. So how much do you think you will generate more through the FCNR deposits with this reduction in the interest rate?

Yes. Though RBI has given an excellent window for us. But you know that from the current in view of the -- observed the latest trends also what the country was expecting at one point of time, the estimates are being -- have been brought down. Now we are talking around $50 billion, $60 billion. The basic issue is coming up on due to some of the global trends in some countries where certain additional regulations have been put in, which will limit the expectations that we had. And what is limiting us also is -- in our bank is that we do not have a foreign branch. Our Gift City branch is going to get opened only in the third quarter. So we are a bit limited in that rate because the leveraging facility is important for those who are -- who want to keep this deposit. So the leveraging of the FCNR deposits will be more useful when customers can avail that in a foreign branch of our bank, which we are limited at this point, we are limited to. So we expect -- we don't have any big aspiration in terms of getting FCNRB because that is the ecosystem in our bank and our network doesn't -- is not facilitating that matter. So we estimate around 20 million, 25 million in that aspect. And of course, RBI have also given a window for OFCB and ECB borrowings. Yes. So we expect to mop up around all the three components of FCRB deposits and the two borrowing routes we expect to mobilize around $100 million in this matter, that's the estimate for us. And we expect that once our ECB -- sorry, once our...

There were some...

Disturbance, you can come back again, we can talk to you again.

Yes, yes, because there have been some disturbances. But if you can hear me now, clearly, can I just ask a small question on the AFS side because if you -- hello, can you hear me?

Yes, yes, I can hear you. Please carry on.

Am I -- If you look at our debt, if you look at our net worth calculation, INR 224 crores has been added additionally. So is it because of the AFS reserve increase? Some revaluation or -- I mean, it's a valuation gain in the IFRS results or something else this INR 224 crores, which is added additionally in the net-worth?

Arnab, CFO?

We are carrying the negative balance from KFLs on '24 books.

So the question is why it has increased net-worth.

Sir, I will explain, sir. Your net worth in the results sheet is INR 12,500 crores. Okay. In the last quarter, it was INR 11,945 crores. So INR 555 crore increase, your profit has increased by INR 331 crores. So the net increase, additional increase is INR 224 crores. So is it what -- is the component AFS...

AFS -- out of that, AFS is [indiscernible]

AFS only, as you are thinking.

AFS is how much?

INR 170 crores.

INR 120 crores. Remaining INR 104 crores?

INR 170 crores.

INR 170 cores. Okay. Okay. So only INR 54 crore additional, which may be -- is it some reversal in the results, some addition in the -- reversal in the results or some other component?

Sir, DT adjustment is there, sir. I mean part of it DT adjustment.

Next question, we have from Sushil Choksey.

Congratulations, a very stable number and a good outlook. Sir, your voice is loud and clear. So my first question is you have indicated some guidance based on the performance which we achieved in Q1 and the guidance, which was given at the end of the year last year. But what would be our aspirational target on ROE, ROA, NIM, cost to income for the current year?

See, in terms of -- we have done 2.53 this time in terms of NIM. We have -- we expect that we should be around 2.60 to 2.65 in NIM. And in terms of ROA, we should be between 0.85 to 0.90.