Punjab & Sind Bank Q1 FY2026 Concall Summary

Key Takeaways

• NIM stabilizes at 2.52%, but recovery timeline is vague: Management calls this the optimum level after repricing deposits early and shifting the loan mix toward higher-yielding AA/A and retail assets. The aspiration to reach 2.71–2.78% is deferred to a Q2 reassessment.
• Credit growth target intact despite a near-flat quarter: Full-year guidance of 15–16% YoY is reaffirmed, but Q1 sequential advance growth was only 0.35%, with ₹533 crore coming from purchased accounts. A ₹7,000 crore sanctioned and unavailed pipeline is the bridge.
• Asset quality improved without write-offs, but SMA pools swelled: Gross and net NPA improved sequentially with zero write-offs, yet SMA 1 and SMA 2 rose to ₹572 crore and ₹558 crore respectively, driven by two lumpy accounts, one of which is state-guaranteed.
• The bank is betting on digital and co-lending to reflate growth: Digital MSME and KCC loans are scaling from pilot to ₹1 crore by Q3, a co-lending platform is about to go live, and 8–10 more co-lending partners are expected. Vehicle loans grew ~40% YoY.
• What to watch next quarter: Whether the ₹7,000 crore pipeline converts fast enough to put the 15–16% credit growth target within reach, the trajectory of SMA 1 and 2 accounts, and any firmer NIM guidance after Q2.

Margin & NIM Strategy

• Early deposit repricing: The bank reduced savings rates and cut retail term deposit rates from 7.45% to 7.25% to 6.90%, while shedding some bulk deposits, anticipating a rate-cut cycle. The cost of deposits has started to ease.
• Asset-side mix shift: The portfolio is being rejigged from AAA to AA and A segments because a pricing war in AAA compressed margins; AA and A offer better pricing. High-yielding assets like gold loans, personal loans, education loans and agricultural loans are being increased.
• Yield compression: Yields declined from 8.63% to 8.47%, but management expects an uptick as advances grow and MCLR-linked loans expand. No quantified yield target was given, with a firmer figure promised after Q2.
• NIM floor called: At 2.52%, management considers NIM at its optimum level and says further action will be taken if it does not hold. The earlier aspiration of 2.71–2.78% is acknowledged but not committed to.

Swarup Kumar Saha: "I think at this point, this is the level where we are, we have been below this also, and now I think this is the optimum level. If doesn't work out, we'll of course will take further action, but I don't think at this point we are in that situation."

Credit Growth & Pipeline

• Q1 was a pause, not a derailment: Sequential advance growth was just 0.35%, with ₹533 crore coming from purchased or acquired accounts. Management attributes this to Q1 seasonality and muted infrastructure demand, not a structural slowdown.
• Pipeline visibility: A ₹7,000 crore sanctioned and unavailed pipeline sits across MSME clusters, specialized trading and manufacturing, sports in Punjab, hosiery, and corporate infrastructure including roads and renewables.
• Infrastructure book: No conscious de-risking is underway; Q1 is normally slow for infrastructure. The bank holds many in-principle and unavailed sanctions in roads and renewables, and sees the softness as market-driven rather than portfolio-driven.
• NBFC exposure: Demand from NBFCs is steady and the bank prices at around 14%, with scope to churn within the existing exposure rather than grow it aggressively.

Asset Quality

• Sequential NPA improvement without write-offs: Gross and net NPA ratios improved quarter-on-quarter with no write-offs taken during the quarter, a point management emphasized as a sign of underlying quality.
• SMA pools expanded on two lumpy accounts: SMA 1 rose to ₹572 crore and SMA 2 to ₹558 crore. One state-government-guaranteed account intermittently enters SMA and is not seen as a threat; a second account moved from SMA 1 to SMA 2.
• Slippage ratio on track: Annualized slippage ratio stood at 0.84%, and management expects to meet its full-year guidance.
• Recovery decline is mechanical: Recovery from written-off accounts fell to ₹109 crore from ₹369 crore, and real recovery plus upgradation fell to ₹350 crore from ₹891 crore, because Q4 included a large NARCL transaction. The ₹1,000 crore full-year recovery and upgradation guidance is reaffirmed.
• MTNL exposure fully provided: The ₹180 crore MTNL account was fully provided for in September 2024 and poses no incremental risk.

Digital & Co-Lending Expansion

• Digital lending scaling fast: Digital KCC and digital MSME loans launched in Q1, with MSME lending opened to ₹25 lakh on a pilot basis. By September it opens to the entire bank, and the limit rises to ₹1 crore by end of Q3.
• Co-lending platform going live: A platform-based co-lending system is in an advanced stage and will go live shortly, enabling automatic account opening. The existing co-lending portfolio is around ₹3,000 crore, and 8–10 more partners are expected.
• Vehicle loans surging: The vehicle loan portfolio grew approximately 40% YoY. A digital journey for home and vehicle loans launched in December has onboarded around 10,000 customers with approximately ₹1,500 crore sanctioned. A tie-up with a major car manufacturer for digital car loans is in place, and second-hand vehicle loans are being expanded through dealer tie-ups.
• Supply chain management product: Integration with a vendor is ongoing and the product will be announced in Q2.
• WhatsApp banking and PSB UNiC app: WhatsApp banking is live and gaining traction; the PSB UNiC app has over 10 lakh active users, and digital transactions have crossed 90%.

Liability Franchise & Distribution

• CASA ratio declined to 30.6%: The de-growth was a shade less than some faster-growing banks, but the trend is down. Retail term deposits grew 5% sequentially, helped by customized liability products.
• Deposit growth guidance maintained: Full-year deposit growth guidance of 8–10% is intact.
• Branch expansion underway: Over 200 branches are planned this year, with more than 160 in high-growth pockets: Bangalore, Hyderabad, Vijayawada, Odisha, Bhubaneswar, Chhattisgarh, Raipur, Bombay, Thane, Nashik, Nagpur. Specialized branches are being created for MSME clusters and mid-corporate manufacturing hubs.
• New zones and focus areas: Four new zonal offices were created in Q1 at Agra, Moga, Patna and Varanasi. Bhubaneswar, Bangalore and Raipur are the next three focus areas over the next 12–18 months.
• BC network doubling: The business correspondent network will increase from 2,282 to at least 4,000 by year-end.
• Builder and housing society tie-ups: Tie-ups with builders and housing societies in Noida and Gurgaon are being increased, with results expected within two quarters.

Treasury & Rate Outlook

• Personal view on rates: Management personally sees room for a further 25–50 bps cut, evolving post-December, but stresses this is not a forecast.
• Treasury gains back-loaded: Significant treasury contribution is expected only post-Q3 and maybe Q4, not before.

Swarup Kumar Saha: "I'm not an astrologer first of all, so I don't know but my personal view is this that in view of the market situation, I still feel that a room is being created for a further cut between 25 to 50 bps, but my own personal perspective, I feel that this should evolve post December."

Guidance & Commitments

Key Metrics