Punjab National Bank: Navigating Growth with Digital Prowess and Asset Quality Focus

Punjab National Bank (PNB) has unveiled its Q2 FY26 financial results, showcasing a period of robust growth and strategic advancements, particularly in its digital initiatives and asset quality management. The bank reported a healthy 14% year-on-year (YoY) increase in net profit, reaching INR 4,904 crore, while operating profit grew by 5.5% YoY to INR 7,227 crore. This performance underscores PNB's continued efforts to strengthen its core business fundamentals and enhance operational efficiency.

The bank's global gross business expanded by 10.6% YoY, touching INR 27.87 trillion. This growth was supported by a 10.9% increase in global deposits to INR 16.17 trillion and a 10.1% rise in global advances to INR 11.7 trillion. PNB's Return on Assets (ROA) stood at 1.05%, surpassing its own guidance, reflecting improved profitability. The tangible book value per share also saw a significant improvement, reaching INR 95.92. These figures collectively paint a picture of a bank making steady progress in a dynamic financial landscape.

Asset Quality and Credit Management

Asset quality remains a top priority for PNB, and the bank has demonstrated commendable progress. Gross Non-Performing Assets (GNPA) decreased to 3.45% as of September 2025, a significant improvement from 4.48% in September 2024. Similarly, Net NPAs improved to 0.36% from 0.46% in the previous year. The Provision Coverage Ratio (PCR), including TWO, stood at a robust 96.91%, exceeding the bank's guidance of more than 96%.

The bank's slippage ratio for Q2 FY26 was 0.71% on an annualized basis, well within the guidance of below 1%. Total recoveries amounted to INR 3,920 crore for the quarter, outpacing fresh slippages of INR 1,955 crore. This consistent trend of higher recoveries than slippages reflects effective asset quality management and a commitment to maintaining a healthy balance sheet. The management noted that the credit cost has turned negative due to the pullback of NPA provisions, further highlighting the improved asset quality.

PNB's credit growth is primarily driven by the RAM (Retail, Agriculture, MSME) segment, which now constitutes 56.8% of domestic advances. Retail advances, excluding IBPC, grew by 18.1%, agriculture by 13%, and MSME by 18.6%. The bank is strategically focusing on increasing the RAM share to 60% to improve yield on advances. A substantial sanctioned book of INR 178,000 crore, awaiting disbursement, is expected to fuel future credit growth, particularly in the corporate loan book.

Digital Transformation and Strategic Initiatives

PNB is aggressively pursuing digital transformation, with digital transactions accounting for nearly 95% of its total transactions in FY26. The bank has witnessed a 53% increase in UPI transactions through its PNB One mobile application. WhatsApp banking users have surged by 92% to 83.4 lakh. The corporate mobile banking application, PNB One BIZ, launched in September 2024, now serves over 1.94 lakh customers with high app ratings.

Key digital lending initiatives include the launch of digital journeys for Dairy Kisan Credit Card, tractor loans, revamped KCC, and e-loans against securities. The bank has also made significant strides in Central Bank Digital Currency (CBDC) adoption, onboarding 5.42 lakh customers and processing 84.18 lakh transactions. New initiatives such as the GenAI Chatbot 'PIHU' and 'RAHEE', along with a unified solution for over 100 digital journeys, are set to further enhance customer experience and operational efficiency.

PNB's HR Transformation Project “UDAAN” focuses on revamping the digital performance management system and capacity building. This includes aligning KRAs with strategic objectives, implementing data-driven appraisal mechanisms, and offering leadership development programs and GenAI learning for employees. The bank is also committed to sustainable financing, with INR 8,029 crore directed towards renewable energy projects and INR 933 crore for electric car financing in H1 FY26.

Outlook and Management Commentary

Looking ahead, PNB's management anticipates an improvement in Net Interest Margin (NIM) from Q3 FY26 onwards, driven by the repricing of deposits and the favorable impact of CRR cuts. The bank expects ROA to touch around 1.10% in the current financial year. While some guidance metrics, such as Net Interest Income growth and Operating Profit growth, were slightly missed in Q2, the management remains confident in achieving its overall FY26 targets.

PNB is actively exploring opportunities in M&A financing, with a focus on collaborative efforts with other large public sector banks. The bank's strategic emphasis on digital leadership, diversified credit growth, and robust asset quality management positions it for sustained performance. The management's proactive approach to risk management and commitment to transparent disclosures instill confidence in its future trajectory.

Segment Comparison Table (Advances - Sept'25)

Conclusion: A Foundation for Future Growth

Punjab National Bank's Q2 FY26 results demonstrate a strategic clarity and disciplined execution. The bank's strong capital position, improving asset quality, and aggressive digital push form a solid foundation for future growth. While challenges remain in certain profitability metrics, the management's proactive initiatives and optimistic outlook suggest a continued focus on enhancing shareholder value and maintaining its position as a leading public sector bank.