Punjab & Sind Bank Q2 FY2026 Concall Summary

Key Takeaways

• Clean-up quarter, not a growth quarter: Gross NPA improved to 2.92% and slippages fell to ₹164 Crore, but operating profit dipped sequentially as treasury income collapsed from ₹210 Crore to ₹60 Crore.
• Recovery shortfall is a timing issue, not a write-off: Two large TWO accounts missed the September 30 deadline for technical reasons; management expects both to land in Q3 and make that quarter's recovery income higher than the prior two quarters combined.
• The CASA squeeze is structural, not cyclical: CASA ratio continues to dip even as the bank adds branches, because retail term deposits are growing at 17–18%. Management is targeting quantum growth quarter-on-quarter while accepting the ratio will stay under pressure for one to two years.
• Capital raise is coming, but not soon: The board approved ₹5,000 Crore (₹3,000 Crore equity, ₹2,000 Crore bonds), but management declined to commit to a Q3 or Q4 timeline, calling itself "much more conservative" on forward guidance.
• What to watch next quarter: Whether the two delayed TWO accounts actually recover, whether treasury delivers the "very, very robust" Q3 management promised, and any concrete timeline on the equity raise.

Asset Quality: The Clean-Up Is Working

• Slippages contained: Slippages fell to ₹164 Crore in the September quarter, continuing a four-to-five-quarter trend of sequential reduction.
• NPA ratios improving: Gross NPA improved sequentially to 2.92%, Net NPA improved 63 bps YoY to 0.83%, and the provision coverage ratio rose 332 bps YoY to 91.88%.
• SMA book shrinking: SMA 1 fell to ₹176 Crore from ₹679 Crore a year ago; SMA 2 fell to ₹184 Crore from ₹408 Crore.
• SMA 0 is inflated by legacy data errors: Half of the ₹2,500 Crore SMA 0 bucket is a one-day default category caused by incorrect due-date feeding in legacy accounts, not fresh stress. New accounts are opened with better data discipline, and retail slippages are declining quarter-on-quarter.
• Flood impact contained: Floods in Punjab and Haryana had limited district-level impact; agriculture slippages in Q2 are down compared to the previous quarter, so no major credit cost is expected.

Saha: "If you see our traction of slippages, 5% is also is a bit high because out of that overall, SMA 0 of Rs.2500 crore, nearly 50% is the one-day default category, you know. The legacy guys, we have not put the correct due date demand in the system based on the cash flow of the individual or the company as far as salary is concerned."

Treasury & Operating Profit: The Q2 Dip

• Treasury drove the sequential profit drop: Operating profit dipped compared to Q1 because treasury income fell from ₹210 Crore collectively in Q1 to ₹60 Crore in Q2.
• Recovery income also disappointed: Recovery in TWO accounts fell short of expectations because certain accounts did not materialize by September 30 for technical reasons.
• Management promises a sharp Q3 rebound: Treasury income is expected to come back in Q3 and Q4, and the delayed TWO accounts are expected to push Q3 recovery income above the prior two quarters.
• Treasury outlook is unusually bullish: Management foresees a "very, very robust" treasury performance in Q3 and Q4, citing a huge opportunity to encash the market situation.

Saha: "In this quarter, we felt a bit short of our expectations in the actual recovery in our TWO accounts because of certain accounts which did not materialize, which were very hopeful to come by 30th of September. But I'm very sure those accounts for some technical reasons which we could not appropriate by 30th of September will come back in the Q3 quarter and we expect that the performance in this quarter in the recovering the TWO accounts will be more than what it is in the previous two quarters."

Margins & NIM: Defending Through Mix

• System-wide NIM pressure acknowledged: Management recognizes the pressure and is responding with a product-mix shift toward higher-yielding retail products: gold loans, mortgage loans, and personal loans.
• Corporate book migrating to better spreads: There is a slight migration from AAA to AA on the corporate side, improving margins. RAROC-based risk-based pricing is implemented, and ALCO monitors yields quarterly.
• RAM mix target raised: The bank wants to inch the RAM percentage up to 57–58% by year-end, using co-lending, TREDS, digital lending, and organic branch performance as cross-sectional drivers.
• Rate-cut mitigation being worked out: A potential 25–50 bps repo rate cut is being discussed internally, and mitigation strategies are being developed.

CASA & Deposits: The Structural Headwind

• CASA ratio continues to dip slowly: CASA growth in Q2 was 8.97%, and the incremental quantum of CASA has improved, but the ratio remains under pressure because retail term deposits are growing at 17–18%.
• Branch expansion is a one-to-two-year CASA play: The bank plans to open 200 branches over the next one to two years, with traction expected from Q3 onwards, but management is clear that branch expansion will take one to two years to yield results on the CASA ratio.
• Tab banking targets new-generation customers: Savings account acquisition through tab banking is fully operational in metro and urban branches and being rolled out to rural and semi-urban areas; current account tab banking will start in about a month.

Growth & Digital: Building the Pipeline

• Credit growth guidance maintained at 15–16%: Management is confident the target is realistically achievable.
• Digital lending scaling up: Vehicle loans and housing loans are now on the digital cycle (housing up to ₹1 Crore, vehicle up to ₹50 lakh); MSME digital lending limit raised from ₹25 lakh to ₹1 Crore, with a target to increase it to ₹5 Crore shortly.
• Vehicle sanction target: The bank aims to take vehicle sanctions through the digital journey to around 70% by this financial year-end; a commercial vehicle product will also be introduced on the digital platform.
• Dedicated digital lending team being created: The bank has internally decided to create a dedicated digital lending team to provide a single touchpoint for all collaboration partners.
• Supply chain finance nearing launch: Approvals are in place; the bank is in an advanced stage and expects to start the process from Q4 onwards.
• PSB Alliance delivering shared services: The bank is using PSB Alliance for SOC and ROC revamp, supply chain finance, asset recovery via Banknet (asset tracing of defaulting borrowers), agri collateral onboarding and monitoring, and e-auction, all on a payment basis.

Capital & Regulatory: Waiting for the Right Moment

• ₹5,000 Crore capital plan approved: The board approved ₹3,000 Crore in equity and ₹2,000 Crore in bonds, to be raised in tranches over one year depending on market conditions.
• Equity raise timeline is deliberately vague: Management declined to commit to raising equity in Q3 or Q4, saying it will assess the market situation after Q3 and provide formal guidance next time.
• ECL norms: no immediate alarm: Management said the five-year glide path makes things easier and no significant impact is expected; the exact quantum and segment-level breakdown will be shared in a subsequent quarter.
• Agri gold loan reclassification has no impact: When asked about provisioning requirements from reclassifying agri gold loans to retail gold, management stated there is "no impact on our bank as such."

Saha: "We would like to be much more conservative at this point of time in terms of the guidance of future. Maybe when we meet next time, we'll have a much more concrete situation to tell you as to the appropriate time which we will explore, but not in Q3. Q4 we will see if possible, we'll look into it, but a formal guidance when we meet next time."

Guidance & Commitments

Key Metrics