Punjab National Bank’s Profit Down by 48.5% Due to Higher Tax Provisions

New Delhi, July 30, 2025: Punjab National Bank (NSE: PNB, BSE: 532461) on Wednesday reported a significant 48.5% year-on-year (YoY) decline in standalone net profit, which fell to ₹1,675 crore for Q1 FY26. This drop occurred despite a robust 28.3% YoY increase in profit before tax (PBT), reaching ₹6,758 crore. The primary reason for the sharp decrease in the bank’s bottom line was a considerable surge in tax expenses, attributed to the adoption of the new tax regime.

Following the announcement, the shares of PNB fell by 1.24% or ₹1.29 and closed at ₹108.00.

Profit & Loss Snapshot

For Q1 FY26, Punjab National Bank’s net profit stood at ₹1,675 crore, a substantial decrease of 48.5% compared to ₹3,252 crore in Q1 FY25. Despite this, profit before tax (PBT) showed a strong positive trend, rising by 28.3% year-on-year to ₹6,758 crore from ₹5,269 crore in the corresponding quarter of the previous fiscal year. Net Interest Income marginally increased by 1.0% to ₹10,578 crore from ₹10,476 crore. Operating profit also saw a healthy increase of 7.6%, reaching ₹7,081 crore from ₹6,581 crore. However, a significant factor impacting the net profit was a 152.0% surge in tax provision, which escalated to ₹5,083 crore in Q1 FY26 from ₹2,017 crore in Q1 FY25. The bank noted in its presentation that “Opting for the new tax regime has elevated our tax provisioning, which significantly impacted net profit.”

Business Growth & Mix

PNB’s global business expanded by 11.6% year-on-year in Q1 FY26, reaching ₹27.19 lakh crore, demonstrating broad-based growth across both deposits and advances. Specifically, Global Deposits increased by 12.9% year-on-year, growing from ₹14.08 lakh crore in Q1 FY25 to ₹15.89 lakh crore in Q1 FY26. Global Advances also saw a 9.8% year-on-year rise, reaching ₹11.30 lakh crore from ₹10.29 lakh crore. Within advances, RAM (Retail, Agriculture & MSME) Advances grew by 11.8% year-on-year to ₹6.10 lakh crore from ₹5.46 lakh crore, while Domestic Advances increased by 9.6% year-on-year, moving from ₹9.84 lakh crore to ₹10.79 lakh crore. The share of RAM advances constituted 56.6% of the total domestic loans, with MSME advances alone registering an impressive 18.6% year-on-year growth.

Asset Quality Hits Best Levels

The lender demonstrated sustained improvement in its asset quality metrics, reporting its best levels in recent quarters. The Gross Non-Performing Asset (NPA) Ratio decreased by 120 basis points, moving from 4.98% in Q1 FY25 to 3.78% in Q1 FY26. Similarly, the Net NPA Ratio improved by 35 basis points, falling from 0.73% to 0.38% over the same period. Provision Coverage saw an increase of 98 basis points, reaching 96.88% in Q1 FY26 from 95.90% in Q1 FY25. Credit Cost significantly declined by 62 basis points, from 0.76% to 0.14%. The Slippage Ratio also slightly improved by 5 basis points, from 0.76% to 0.71%. Total slippages during the quarter amounted to ₹1,886 crore, which was notably lower than the ₹3,001 crore recorded in Q4 FY25.

Capital Position

PNB’s capital position remained robust. The Capital to Risk-weighted Assets Ratio (CRAR) improved to 17.50% in Q1 FY26 from 15.79% in Q1 FY25. The Common Equity Tier-1 (CET-1) Ratio also increased, reaching 12.95% compared to 10.95% in the prior year. Total Tier 1 Capital stood at ₹1.24 lakh crore in Q1 FY26, up from ₹0.98 lakh crore in Q1 FY25. The bank reiterated its capital raising plan of ₹8,000 crore for FY26, which will be evenly split between AT-1 and Tier-2 bonds.

Guidance vs Performance (Q1 Actuals)

Comparing Q1 FY26 actual performance against the FY26 guidance, Punjab National Bank’s credit growth of 9.84% was slightly below the targeted 11–12%. However, deposit growth significantly exceeded expectations, reaching 12.86% against a guidance of 9–10%. The CASA (Current Account Savings Account) Ratio stood at 36.99%, falling short of the >38% target. While the Gross NPA (GNPA) of 3.78% was above the <3% target, the Return on Assets (RoA) was 0.37%, below the >1% guidance. On a positive note, the Credit Cost of 0.14% was well within the <0.5% target.

Management Focus & Strategic Outlook

PNB continued its investment in digital transformation initiatives, with over 95.6% of its transactions now conducted digitally, and more than 2 crore active users of its PNB One app. The bank also expanded its ESG (Environmental, Social, and Governance) footprint during the quarter, sanctioning ₹2,382 crore for renewable energy projects and ₹314 crore for green auto loans.

Insights For Investors

• Sharp Net Profit Decline Despite Strong PBT: Net profit fell 48.5% YoY due to a 152% surge in tax provisions under the new tax regime, overshadowing strong operating profit and PBT growth.
• Stable Core Performance: Net Interest Income rose marginally by 1%, and operating profit grew 7.6% YoY, indicating operational resilience despite margin pressures.
• Strong Business Growth: Global business expanded 11.6% YoY, with healthy growth in both deposits (+12.9%) and advances (+9.8%), supported by robust MSME lending (+18.6%).
• Improved Asset Quality: Gross NPA improved to 3.78% (from 4.98% YoY), Net NPA to 0.38%, and Credit Cost fell to 0.14%, showing better risk management and recovery efficiency.
• Solid Capital Position: CRAR improved to 17.50%, and CET-1 to 12.95%, enhancing lending capacity; capital raise of ₹8,000 Cr planned via bonds for FY26.
• Digital and ESG Focus: Over 95.6% of transactions are digital; significant disbursements made in green financing, positioning PNB for sustainable growth.

Road Ahead For PNB

Punjab National Bank enters the rest of FY26 with a solid foundation in asset quality, capital adequacy, and digital infrastructure. Despite the steep decline in net profit due to higher tax provisioning, the underlying business fundamentals remain sound, supported by strong credit growth and improving operating efficiency. The bank’s continued focus on MSME, retail, and agriculture lending is expected to drive sustained credit momentum. Its efforts in digital transformation and ESG financing not only support operational scalability but also align with long-term sustainability goals. Looking ahead, stabilising tax outflows under the new regime and achieving targeted CASA and asset quality metrics will be key. If PNB maintains its current trajectory of business growth and credit discipline, it is well-positioned to enhance profitability and shareholder value in the coming quarters.

About Punjab National Bank

Punjab National Bank stands as one of India’s largest public sector banks, boasting a widespread nationwide presence with over 10,200 branches and 11,240 ATMs. With a business mix exceeding ₹27 lakh crore, the bank offers a comprehensive suite of financial services encompassing retail, MSME, corporate, and international banking segments. PNB is listed on both the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) and is majority-owned by the Government of India.

REF: https://nsearchives.nseindia.com/corporate/pnb2_30072025141550_Analyst_Presentation_June25_merged_DS.pdf

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