Punjab National Bank: Strong Q2 FY26 earnings driven by asset quality, digital growth

Punjab National Bank announced robust financial results for Q2 FY26, with operating profit reaching INR7,227 crores, a 5.46% year-on-year (YoY) increase. Net profit rose impressively by 14% YoY to INR4,904 crores. The bank's asset quality saw significant improvement, with gross non-performing assets (GNPA) reducing to 3.45% and net NPA improving to 0.36%. The provision coverage ratio (PCR) stands strong at 96.91%, exceeding the bank's guidance of over 96%. Total recoveries for the quarter were INR3,920 crores, surpassing fresh slippages of INR1,955 crores, contributing to a negative credit cost.

Digital transformation remains a key focus, with UPI transactions through the PNB One mobile app increasing by 53% YoY. WhatsApp banking users grew by 92% to 83.4 lakhs. The bank also sanctioned and disbursed INR7,649 crores in additional loans through digital channels during Q2 FY26. Loan growth guidance is set at 11-12% for the credit book, with retail advances (excluding IBPC) growing by 18%, agriculture by 13%, and MSME by 18.6%. The bank anticipates further improvement in Net Interest Margin (NIM) and Net Interest Income (NII) in Q3 and Q4, driven by deposit repricing.

The bank expects its Return on Assets (ROA) to reach around 1.10% by Q3 or Q4, up from 1.05% in Q2. The tangible book value per share improved to 95.92 as of September 30, 2025, from INR79.18 a year prior. Capital adequacy remains robust at 17.19%. The bank plans to increase its RAM (Retail, Agriculture, MSME) share to 57-58%, reducing the corporate loan book to 40% in the long run.