PSB Q3 FY26 earnings call.
A source-linked concall view: reported numbers, management language, guidance, commitments and risks that should carry forward.
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What the record says.
Punjab & Sind Bank delivered a strong Q3 FY26 with 19.15% YoY PAT growth to Rs 336 crore and 22.73% operating profit growth to Rs 594 crore. Credit growth accelerated to 15.05% YoY (advances Rs 1.10 lakh crore) significantly outpacing deposit growth of 9.27%, creating near-term LCR and CD ratio pressure at 79.24%. The bank made excess provisions on two state government guaranteed accounts (20-30% provisioning vs standard requirement) despite calling them low-risk, as SMA accounts rose sequentially. RAM segment grew 21.94% YoY and now comprises 57.45% of advances (targeting 60% by March 2026). Asset quality improved materially with gross NPA at 2.60% (down 123 bps) and net NPA at 0.74% (below 0.75% guidance), with management guiding to 2.25% gross NPA by March 2026. ROA remains below peers at 0.79% with cost-to-income at elevated 60.84%, though both metrics are on improving trajectories. The bank turned away Rs 3,000 crore of corporate loans to protect margins, prioritizing retail/agriculture/MSME segments. Management maintained FY26 guidance on track and targets 1% ROA by March 2027 through NIM improvement, fee income acceleration (digital journeys, PSLC income, supply chain financing), and controlled credit costs. Treasury outlook remains challenging with SDL spreads widening.
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Guidance to track
- Management indicated current 2.60% gross NPA will improve beyond the 2.5% target to 2.25% by fiscal year-end, driven by continued recovery and low slippages of 0.16%.
- Retail, Agriculture, and MSME segments currently at 57.45% of total advances (growth 21.94% YoY) will increase to 60% by March 2026 through continued focus on these higher-yield segments, moving away from competitive corporate book.
- With credit cost already negligible at 0.05%, ROA expansion to 1% will come from NIM improvement through portfolio mix shift, fee income acceleration (core fee up 29% YoY), and supply chain financing/cash management services rollout.
- Bank targets gradual reduction from current 60.84% through income growth (fee, digital, cross-sell), with 3-4 percentage point annual improvements, as branch expansion and HR investments drive efficiency.
Risks flagged
- Two state government accounts (originally Rs 1,500 crore and Rs 1,200 crore exposures, now reduced to Rs 1,000 crore and Rs 627 crore) slipped to SMA-1/SMA-2 status with sequential uptick in SMA books. Management provided excess provisioning (20-30%) despite stating low delinquency risk. Analyst directly questioned whether these will eventually slip to NPA or resolve beforehand, with management unable to provide definitive timeline.
- Credit growth (15.05%) significantly outpacing deposit growth (9.27%) has pushed CD ratio to 79.24%, though below industry levels of 82-83%. Management acknowledges deposit mobilization as critical and is repricing savings rates aggressively (from 7.45% to 6.60%) to reduce cost of funds while maintaining growth.
- Analyst raised concern about unallocated segment expenses jumping to Rs 269.58 crore from the typical Rs 50-70 crore range, compared to segment-wise profitability of Rs 863 crore. Management deflected to CFO for separate follow-up, leaving the explanation unresolved on the call.
- NIM stable at 2.59% (flat sequentially from Q2) despite 123bps repo rate cuts, indicating limited pass-through benefits. Management expects NIM to bottom out by Q4 FY26. Declining CASA proportion and competitive retail/agriculture lending compress margins while management prioritizes shifting portfolio mix to higher-yield segments.
Key quotes
- We have let go around Rs 3,000 crore of corporate loan book just because we didn't want to provide a repricing at a rate which is not convenient to us.
- We are looking at a number of 2.25% [gross NPA] by the end of March.
- ROA of 1% is surely possible by the end of March 27.
- We are building it [provisions] in one of the those two guaranteed state government accounts we are having provision of 30% one of them is at 20%.
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