Punjab National Bank (PNB) Q2 FY27 Earnings Call: Guides 17-18% Corporate Loan Growth, Gross NPA Falls to 2.55%

Punjab National Bank held its Q2 FY27 earnings call on October 16, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Core Earnings Quality Improves Markedly

• Net profit of Rs.5,532 Cr — Q2 FY 2026-2027, up 12.8% YoY; NII grew 10.8% YoY, surpassing the 7% FY 2026-2027 guidance, and fee income grew 16% YoY.
• Core operating profit grew 29.4% YoY — forming 79% of total operating profit vs 64% in Q2 FY 2025-2026; core operating profit stood at Rs.5,971 Cr (vs Rs.5,531 Cr in Q1 FY 2026-2027), which management expects to sustain as a buffer against lower recoveries.
• Domestic NIM improved 10 bps QoQ to 2.74% — cost-to-income improved to 45% from 51.20% in Q2 FY 2025-2026; ROA at 1.05% (1.09% cited in the credit-cost discussion) and ROE at 17.32%.
• Treasury income of Rs.753 Cr in Q2 FY 2026-2027 — management clarified this figure (not the Rs.2,193 Cr referenced from the P&L), down from Rs.1,700 Cr in Q2 FY 2025-2026, attributed to a 30 bps hardening in G-Sec yields (currently 7.41%), described as transitory.
• Global business grew 11.9% YoY to Rs.31.18 lakh Cr — core advances grew 17.4% YoY, driven by RAM; capital adequacy at 17.95% with CET1 of 14.44% vs the 8% regulatory requirement.
• Macro backdrop cited by management — MPC/World Bank revised India's FY 2026-2027 GDP estimate to 7.1%, vs ~3.1% global GDP growth; management derived ~11% nominal GDP for FY 2026-2027, implying ~13-14% credit growth opportunity.

Cleaner Book, But Provisioning Optics Need Unpacking

• Gross NPA improved to 2.55% — from 3.45% in Q1 FY 2026-2027; net NPA at 0.25%; fresh slippages ratio at 0.77% vs the FY 2026-2027 guidance of <0.9%; recovery was 1.17x of slippages.
• Net P&L provisioning of only Rs.97 Cr in Q2 FY 2026-2027 — a Rs.798 Cr write-back from a standard account offset the Rs.817 Cr NPA provision; of that, Rs.125 Cr was a floating provision for ECL, with the remainder maintaining PCR at 97%.
• MD & CEO Ashok Chandra clarified no Rs.2,000 Cr write-back occurred — total NPA provisions were Rs.817 Cr including the Rs.125 Cr floating provision and a write-back of ~Rs.148 Cr; management also utilized a Rs.900 Cr write-back and created an additional Rs.1,150 Cr standard provision for ECL migration.
• SMA (0/1/2) book at an all-time low of 2.49-2.50% — SMA 0 at 1.26%, SMA 1 at 0.56%, SMA 2 at 0.67%; total Rs.33,410 Cr, improving from ~2.9% in Q1 FY 2026-2027.
• AFS reserves turned negative to -Rs.128 Cr — vs +Rs.445 Cr in Q1 FY 2026-2027; the HTM hardening impact sits outside the ~Rs.5,000 Cr ECL loan-book requirement, with discussions ongoing at RBI and IFR reserves of Rs.4,000 Cr potentially usable.
• Q2 FY 2026-2027 credit cost at 0.25% — driven by Rs.700 Cr extra NPA provisions and Rs.125 Cr floating provisions, net of Rs.146 Cr write-back.
• Loans disbursed since Jul 2020 (Rs.14.09 lakh Cr) carry only 0.42% NPA — cited by management as evidence of improved underwriting.

Funding Costs Fall; Repo Hike a Tailwind for H2

• Domestic cost of deposits fell to 4.97% — from 5.02% in Q1 FY 2026-2027 and 5.18% in Q2 FY 2025-2026; global cost of funds declined to 4.35%; management attributed the 10 bps QoQ NIM improvement to this cost focus.
• FCNR proceeds of $2.7 bn deployed — (vs a $2.5 bn target) to repay high-cost bulk deposits and CDs, cutting high-cost deposit share from ~19% in Q1 FY 2026-2027 to ~17% in Q2; CDs reduced from Rs.60,000 Cr to Rs.40,000 Cr.
• Repo hike expected to add 7-9 bps to NIM in Q3 FY 2026-2027 — given 56% of the loan book is repo-linked; management guided NIM to 2.6-2.7% for FY 2026-2027 (current NIM 2.58% on the global measure) and expects profitability normalization from FY 2027-2028.
• Deposit growth guided at 8-9% for FY 2026-2027 ex-FCNR — Q2 printed 9.9% including FCNR; overall SA growth was only ~2% in Q2 FY 2026-2027 as SB institutional degrew 3.84% on government deposits moving to just-in-time deposits with RBI; SB individual grew 8.36% and Current Account 10.76-12%.
• No deposit rate hikes planned as of October 2026 — retail flows are adequate to support ~11-12% credit growth; the current deposit base can support credit growth up to a 77-78% CD ratio; LCR at 133%.
• Rs.58,000 Cr of low-yielding advances shed in H1 FY 2026-2027 — replaced with Rs.2,50,000 Cr in corporate loans sanctioned at better rates; churn to continue in Q3/Q4 FY 2026-2027.

Corporate-Led Growth; RAM Mix Targeted Higher

• Corporate loan book growth guided at 17-18%+ for FY 2026-2027 — corporate sanctions were Rs.4 lakh Cr in FY 2025-2026 and crossed Rs.2.5 lakh Cr in H1 FY 2026-2027; the disbursement pipeline stands at Rs.1,57,000-1.58 lakh Cr.
• RAM mix guided at 58-59% by end of FY 2026-2027 — with the balance corporate; management notes the peer corporate mix is currently around 40-41%.
• Gold loan book grew ~97-98% YoY to Rs.36,000 Cr — with 93-94% in the agri segment; yield at 8.6% in Q2 FY 2026-2027 (peers range 9-20%), expected to rise to 8.75-8.9% in Q2/Q3 FY 2026-2027 on the repo rate increase.
• Credit card base reached 11 lakh in Q2 FY 2026-2027 — up from 6 lakh in Mar FY 2024-2025 and 8 lakh in Mar FY 2025-2026; management guided ~Rs.200 Cr of fee income contribution from this segment in FY 2027-2028.
• Digital sanctions crossed Rs.41,500 Cr in H1 FY 2026-2027 — against the FY 2026-2027 guidance of adding Rs.1 lakh Cr; 162 new branches opened (target 250 for FY 2026-2027), with 119 in South/West India.
• Q2 corporate slippage originated from the road/infrastructure sector — ~Rs.300 Cr domestic corporate slippage; management stated no other stress or impact from the Middle East conflict.

Recovery Guidance Trimmed; ECL Transition Mapped

• Recovery guidance revised down to Rs.12,000-13,000 Cr for FY 2026-2027 — from the earlier >Rs.14,000 Cr target; H1 FY 2026-2027 actuals stood at Rs.5,600 Cr with Q2 at ~Rs.3,500 Cr; management described the revised target as challenging.
• Recovery from written-off accounts guided at Rs.900-1,000 Cr in H2 FY 2026-2027 — with a total recovery target of Rs.12,000 Cr for FY 2027-2028 as slippages decline; fee verticals growing >16% YoY are being accelerated to offset the declining recovery trend.
• ECL migration impact guided at 15 bps on a steady-state basis in FY 2027-2028 — total loan-book requirement ~Rs.5,000 Cr with Rs.3,700 Cr already provisioned as of Q2 FY 2026-2027; Rs.2,500-2,560 Cr of NPA ECL standard provisions plus Rs.100-150 Cr additional floating provisions planned for Q3/Q4 FY 2026-2027 will offset the impact.
• ECL provisions estimate lowered to ~Rs.8,000 Cr for FY 2026-2027 — down from the earlier Rs.9,000-10,000 Cr estimate; credit cost guided at 0.25-0.30% for FY 2027-2028.
• Agri stress flagged in Maharashtra and Andhra — increased slippages acknowledged in Q2 FY 2026-2027, though management stated current stress is not present and is being navigated via a large-scale farmer connect program; drought risks are expected over the next 2-3 months (Q3/Q4 FY 2026-2027), with any restructuring subject to SLBC and local government decisions.
• Island FS recovery provision of Rs.1,200-1,300 Cr fully written back in Q2 FY 2026-2027 — replaced by Rs.100-150 Cr in additional standard account provisions for ECL.

H2 Acceleration, Tech Build-Out, and Return Targets

• H2 FY 2026-2027 guided to outperform H1 across operating parameters — NIM improvement driven internally (domestic NIM up 10 bps without repo impact) and further accelerated by the repo rate hike; an additional 1-2% credit growth guided in H2 FY 2026-2027.
• ROE commitment of minimum 15% and ROA of over 1.04 for FY 2027-2028 — underpinned by core operating profit strength and controlled credit costs.
• M&A financing: MOU with a foreign bank imminent — management expects 1-2 transitions in Q3 FY 2026-2027; GIFT City traction expected from Q4 FY 2026-2027.
• Technology: Centers of Excellence created in AI and Quantum — quantum deployed on 200+ public-facing applications (NIST USA certified); Quantum Financial Innovation Lab established in Amravati with the Andhra government; in-house tech team of 150+ software professionals; an AI program with Microsoft trained 47,544 officers.
• On consolidation rumors tied to the government's 2047 vision, management had no comment — responding only "hearing from you" when asked.
• MD & CEO guided commitment to consistency in growth, profitability, and asset quality improvement — expressing confidence that Q2 FY 2026-2027's positive momentum will continue.