Punjab & Sind Bank

Punjab & Sind Bank (PSB) is a Government of India (GoI) undertaking with over 100 years of operation. It has significantly grown its branch network with a presence predominantly in north India. As on October 31, 2010, its network comprised of 926 branches and 63 owned ATMs and access to more than 50,000 ATMs across the country. It has 627 branches in North India out of which 402 branches are in Punjab alone. It also sponsored one regional rural bank, Sutlej Gramin Bank, in collaboration with the GoI and the state Government of Punjab. As on September 30, 2010, it has a total of 8,047 employees, serving over 0.66 crore customers.



It has entered into contract agency agreements for distribution of non-life insurance products with Bajaj Allianz in 2003, and for distribution of life insurance products with Aviva LIC India Pvt. Ltd. on September 2004. It has also entered into a distribution agreement in 2005 with UTI AMC for distribution of mutual fund products.

It is planning to broaden its product base and service offering to its clients. The bank proposes to roll out internet banking systems, mobile banking, install new ATMs, provide clients loan syndication, and higher focus on high margin agency and distribution agreements amongst others. All these measures are expected to augment growth and profitability going forward.

PSB is the only PSU bank (in non SBI group), which is still unlisted. It is coming out with an Initial Public Offer (IPO) to raise capital amounting to Rs 452 – 480 crore with a issue of 4 crore equity shares of Rs 10 each in a price band of Rs 113-120 per share through the book building process. The IPO comprises a net issue of 3.8 crore of equity shares to public and reservation of 20 lakh equity shares for subscription by eligible employees (in the employee reservation portion). The bank has offered a 5% discount on the price band fixed for the retail investor and eligible employee.

The object of the IPO is to expand its capital base to meet the future capital requirements arising out of the growth in its assets due to economic growth of the Indian economy and for other general corporate purpose. The bank's current capital adequacy ratio ( BASEL II) was 13.04% at he end of the quarter ended September 2010 as against the RBI mandated 9% and GOI stipulation of 12%. Post IPO, the CAR of the bank would go up to 14.43%- 14.52%, depending on the issue price.

Financial & Business Analysis:

Total income of the bank has grown at CAGR of 31% from FY 2007 to FY 2010. Over the same period, the CAGR in net interest income, PBT before provisions and net profit stand at 17.4%, 22.9% and 8.8%, respectively.

Between FY 2007 to FY 2010, deposits have grown at a CAGR of 36.5% to Rs 49155.08 crore as on 31st March 2010. Term deposit forms 75% of the total deposit base at end of FY 2010. As such, the proposition of low cost deposit has come down from 46% at end of FY 2007 to 25% at end of FY 2010.

For the year ended March 2010 (FY 2010), it reported a 38% rise in the business mix to Rs 81794.19 crore. There was a 15% increase in net profit to Rs 501.13 crore on the back of a 17% increase in the net interest income (NII) to Rs 1183.94 crore. NIM for FY 2010 declined from 3.24% to 2.67% due to dual effect of increase in high cost deposits and decline in yield.

The credit-deposit ratio declined from 70.99% to 66.6%. Share of investment in total assets marginally increased from 31% to 32% due to investment in bonds and certificates of deposits whereas share of advances to total assets remained in range of 58% to 60%.

For the half-year ended September 2010, the bank reported a net profit of Rs 276.38 crore on the back of Rs 780.6 crore of NII. Total business stood at Rs 88659.83 crore, with deposits of Rs 52945.08 crore and advances of Rs 35714.75 crore. NIM stood at 3.0%. Asset quality improved with gross NPA coming down from 1.01% to 0.92% and Net NPA from 0.49% to 0.44% on y-o-y basis. CAR stood at 13.04% as on 30 September 2010.

Between FY 2007 to FY 2010, advances have grown at a CAGR of 40.7% to Rs 32639.11 crore as on 31 March 2010. As on 31st March 2010 retail lending accounts for 15%, corporate around 51% while others including priority sector is 33%. For H1 FY 2011, advances stood at Rs 35714.75 crore of which retail lending accounts for 15%, corporate around 57% while others including priority sector is 28%

Asset quality has improved over the years. The net NPA ratio has come down from 8.4% in 2005 to presently 0.44% for H1 FY 2011. As of September 30, 2010, concentration of NPAs was mostly in gems and jewellery (18%), textiles (3%), food processing (1%), rubber and rubber products (0.22%), metal and metal products (6%) and vegetable oils (10%). As of September 30, 2010, approximately 23% of its gross NPAs were concentrated in the real estate sector.

As on 31 March 2010, total restructured assets increased by 19% to Rs 636.16 crore forming 1.94% of gross advance and 29% of tangible net worth. As on 30 September 2010, total restructured assets stood at Rs 971 crore forming 2.71% of loan asset. The provision coverage including technical write-offs stood at 89.62% as on 31st March 2010. For 30 September 2010, the coverage ratio was at 86.83%.

via CM