Punjab & Sind Bank — Q3 FY26 earnings call

Call held 20 Jan 2026

Management summary

Punjab & Sind Bank delivered a strong Q3 FY26 performance, marked by 11.75% YoY total business growth and significant asset quality improvement, with Gross NPA falling to 2.60% and Net NPA to 0.74%. The bank's operating profit rose 22.73% to Rs.594 crore, driven by robust core fee income growth. Management is strategically focusing on RAM segments, digital transformation, and branch expansion to achieve a 1% RoA by March 2027 and a Cost-to-Income ratio of 50-55% by the same period, despite ongoing NIM pressures.

Highlights

  • Total Business grew by 11.75% Y-o-Y to Rs.2,49,499 Crore.

  • Operating Profit for Q3 grew by 22.73% to Rs.594 Crore, and Net Profit grew by 19.15% to Rs.336 Crore.

  • Asset quality significantly improved with Gross NPA at 2.60% (down 123 bps Y-o-Y) and Net NPA at 0.74% (down 51 bps Y-o-Y).

  • Core fee income showed strong traction, growing 28.97% Y-o-Y for Q3, contributing to overall non-interest income growth of 50% Y-o-Y.

  • Retail Term Deposits grew at a handsome rate of 18.34% for the quarter ending December '25.

Concerns

  • Net Interest Margin (NIM) is low at 2.59% and continuously facing downward pressure.

  • Unallocated expenses increased significantly to Rs.269.58 Crore, primarily due to provisions.

  • Two state government guaranteed accounts slipped to SMA 1 and 2, though adequately provided for and not expected to become delinquent.

Key financials

2 periods

Headline

  • Total Business
    ₹2.49L Cr
    YoY +11.8%
  • Deposit Growth
    ₹1.39L Cr
    YoY +9.3%
  • Advances Growth
    ₹1.10L Cr
    YoY +15%
  • Gross NPA
    2.6%
  • Net NPA
    0.74%
  • Cost to Income Ratio
    60.8%
  • Return on Assets (RoA)
    0.79%

Q3

  • Operating Profit
    ₹594 Cr
    YoY +22.7%
  • Net Profit
    ₹336 Cr
    YoY +19.1%

What they filed

Q1 FY27: revenue up 10.4%, net profit up 23.4% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue2,739 2,931 3,159 2,911 2,999 +9%3,042 +4%3,030 −4%3,213 +10%
Net profit240 282 313 269 295 +23%336 +19%422 +35%332 +23%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • RAM (Retail, Agri, MSME)
    21.9% Growth57.5% Share of Total Advances
  • Retail
    19.6% Growth
  • Agri
    24.3% Growth
  • MSME
    22.9% Growth
  • Gold Loan Portfolio
    ₹4,800 Cr Value₹1,700 Cr Co-lending Share₹1,000 Cr Agriculture Share8.8% Yield

Capital allocation

high confidence
  • Liquidity Liquidity disclosed Capital Adequacy Ratio (CRAR) is 16.83%, increasing to 18.01% with nine-month profit. RWA density improved from 61.18% to 58.64%. The bank has made provisions of 30% and 20% for two state government guaranteed accounts (SMA 1 and 2) respectively. Provision Coverage Ratio (PCR) increased by 270 bps to 92.23% (with TWO) and by 408 bps to 72.28% (without TWO).
    In terms of the capital adequacy, the bank continues to have a good capital adequacy of 16.83%. If you add back the nine-month profit, which we have not added so far as per norms, the CRAR is at 18.01%. This shows that the bank continues to work on capital optimized growth. In fact, the credit risk weighted asset density which we call RWA density has also shown improvement from 61.18% to 58.64%. So overall we believe that we'll continue on this capital optimized growth going forward as well. ... In terms of the SMA 1 and 2, while sequentially the total amount of SMA 1 and 2 has shown an uptick, but these are primarily due to two state government guaranteed accounts which we have also adequately provided for in our internal books as a standard, but it is backed by state government guarantee. ... We are having provision of 30% and the other one is at 20%.

Guidance & targets

Market Share

  • RAM to Total Advances Market Share · by end of March 2026 · High confidence 60%
    The percentage of RAM to the Total Advances has now improved to 57.45% and we expect that this percentage will gradually go up and by the end of March 26, we should be at 60% and the guidance for FY 26-27 is 70%.

    — Mr. Swarup Kumar Saha

  • RAM to Total Advances Market Share · FY 2026-27 · High confidence 70%

    — Mr. Swarup Kumar Saha

Asset Quality

  • Gross NPA Asset Quality · very shortly · High confidence below 2.5%
    We are also on track in the gross NPA which we are already at 2.60% and we are very sure that we are going to bring it to below 2.5% very shortly.

    — Mr. Swarup Kumar Saha

Credit Growth

  • Overall Credit Growth Credit Growth · current FY · High confidence 15% to 16%
    overall the credit growth we are aligning around 15% to 16%, right

    — Mr. Swarup Kumar Saha

Deposit Growth

  • Overall Deposit Growth Deposit Growth · current FY · High confidence 8% to 10%
    whereas the deposit is at 7.26% in nine months and targeted to be around 8% to 10%.

    — Mr. Ashok Ajmera

Profitability

  • Return on Assets (RoA) Profitability · by end of March 2027 · High confidence 1%
    in terms of the futuristic ROA guidance, we think that ROA of 1% is surely possible by the end of March ‘27.

    — Mr. Swarup Kumar Saha

Efficiency

  • Cost to Income Ratio Efficiency · by end of March 2027 · High confidence 50% to 55%
    So we expect that if all the things work out the way that we have planned, by the end of March 27, we should be nearly around between 50% to 55%.

    — Mr. Swarup Kumar Saha

  • Cost to Income Ratio Efficiency · very shortly · High confidence 58% to 60%
    We expect that this range will come down to around between 58% to 60% very shortly and then move on to a range between 53% to 56%, once it starts to stabilize.

    — Mr. Swarup Kumar Saha

  • Cost to Income Ratio Efficiency · after reaching 58-60% · Medium confidence 53% to 56%

    — Mr. Swarup Kumar Saha

Business Pipeline

  • Corporate Loan Pipeline Business Pipeline · current · High confidence Rs.20,000 crore
    The overall pipeline so far is Rs.20,000 crore.

    — Mr. Swarup Kumar Saha

Business Development

  • Leads Generation per MD/ED visit Business Development · per visit · High confidence Rs.5000 Crore
    Anywhere our MD or ED visits, we generate at least Rs.5000 Crores of leads.

    — Mr. Swarup Kumar Saha

What to watch in Q4 FY26

Gross NPA

next quarter
Current 2.60%
Target Below 2.5%

Why it matters

Key indicator of asset quality improvement and achievement of management's stated guidance.

We are also on track in the gross NPA which we are already at 2.60% and we are very sure that we are going to bring it to below 2.5% very shortly.

Risks & concerns

  • NIM compression

    medium

    NIM is at 2.59% and continuously coming down, posing a challenge to profitability.

    Analyst acknowledged

  • Increase in unallocated expenses

    low

    Unallocated expenses increased to Rs.269.58 Crore, clarified to be mainly due to provisions.

    Analyst acknowledged

  • State government guaranteed accounts slipping to NPA

    low

    Two state government guaranteed accounts (SMA 1 and 2) have slipped, but the bank has made 30% and 20% provisions respectively and does not foresee immediate delinquency.

    Analyst downplayed

Q&A highlights

8 direct
Mismatch between credit and deposit growth, and NIM sustainability. Direct
Having said that, if you will appreciate that in the present situation that we are in at this point of time, our CD ratio is around 79.24%. What is interesting here is that while the pressure of the CD ratio may look a bit challenging in terms of managing the overall outlook of the Bank's business growth, what I would like you to focus on is that though the total deposit growth is a bit less, our Retail Term Deposit is growing at around 18% plus and overall the credit growth we are aligning around 15% to 16%, right, and also, in terms of the various dynamics of the ecosystem to protect our margins as much as possible.

Addresses a core banking challenge (funding credit growth) and explains strategy to maintain NIM by focusing on retail term deposits and higher-yielding RAM segments.

Asked by Mr. Ashok Ajmera

Alternative funding sources for NIM protection given low NIM. Direct
The alternative is that we price our products and we go into the segments of the asset side where we can really get a margin of 3%-3.5%. If you see the dynamics of our external credit rating portfolio you will find that we have moved from the AAA to the AA and overall we are keeping the balance well though the AAA at one point of time was 19.49%, it is at 16.60% now. AA rated was 22.38%, now it is 26.43%. So this is where we create a room for us, and also, as we increase our Retail, Agri, MSME growth.

Explains how the bank plans to improve NIM by shifting asset mix towards higher-yielding retail, agri, and MSME segments and by managing credit rating exposure.

Asked by Mr. Ashok Ajmera

NBFC and Gold Loan composition and yield. Direct
Regarding the overall Gold Loan portfolio of Rs.4800 Crore, Rs.1700 Crore is through co-lending and out of that Rs.1000 Crore is agriculture and with regard to the yield in gold loan, it is somewhere around 8.85%.

Provides specific breakdown and yield for a key growth segment (Gold Loan), which is part of the strategy to improve NIM.

Asked by Mr. Ashok Ajmera

Significant increase in unallocated expenses. Direct
It is mainly on account of provisions made during the quarter.

Clarifies the reason for a large increase in unallocated expenses, attributing it to provisions, which is crucial for understanding profitability.

Asked by Mr. Ashok Ajmera

Status of two state government guaranteed accounts (SMA 1 and 2) and potential for NPA. Direct
See these are these are systemic accounts, as of now, we don't foresee the accounts getting delinquent, number one, and I can also tell you if they if they do so at any point of time, at present we are having more provisions in a standard account than it is required in a substandard account.

Addresses a potential asset quality concern, reassuring that provisions are adequate and delinquency is not immediately foreseen, providing details on exposure reduction.

Asked by Mr. Ashok Ajmera

ROA target of 1% and timeline, given current low credit cost. Direct
in terms of the futuristic ROA guidance, we think that ROA of 1% is surely possible by the end of March ‘27.

Reaffirms the bank's long-term ROA target and timeline, linking it to strategic provisioning and balance sheet management.

Asked by Mr. Jai Mundhra

Digital and HR spend for future growth. Direct
On the human resources spend, I can give you a snapshot that just to give you an idea of what you are trying to arrive at. In the last three years, we have an approved outlay of Rs.900 crores in IT.

Provides insight into the bank's investment in technology and human resources, which are critical enablers for its growth strategy.

Asked by Mr. Sushil Choksey

Cost to Income ratio and path to 55% target. Direct
Yes, absolutely right. The only solution is to increase income. Cost only has limited impact that happens in terms of reduction in costs. Traditionally our bank's Cost to Income ratio has been very high. So the only way is to generate more and more income out of our business models. So we expect that if all the things work out the way that we have planned, by the end of March 27, we should be nearly around between 50% to 55%.

Explains the strategy for improving the cost-to-income ratio, emphasizing income generation over cost cutting, and provides a clear target and timeline.

Asked by Mr. Hriday Choksey

3 min read 7 chapters

Detailed narrative

Strong Business Growth and Profitability

Punjab & Sind Bank reported a robust Q3 FY26, with total business growing 11.75% year-on-year to Rs.2,49,499 Crore. Operating profit for the quarter increased by 22.73% to Rs.594 Crore, and net profit rose 19.15% to Rs.336 Crore. For the nine-month period, operating profit grew 30.18% to Rs.1639 Crores and net profit increased 28.02% to Rs.900 Crores, demonstrating consistent financial performance.

Improved Asset Quality and Provisioning

The bank significantly improved its asset quality, with Gross NPA declining 123 basis points year-on-year to 2.60% and Net NPA reaching 0.74%, a 51 bps decline. The Provision Coverage Ratio (PCR) increased by 270 bps to 92.23% (with TWO) and by 408 bps to 72.28% (without TWO). Slippage ratio remained low at 0.16%, and credit cost was 0.05%. The bank also expects Rs.250-300 crore recovery from written-off accounts in Q3 FY26.

Strategic Focus on RAM Segments and Digital Transformation

PSB is actively shifting its portfolio mix towards higher-yielding Retail, Agri, and MSME (RAM) segments, which collectively grew at 21.94% in Q3 FY26. Retail grew 19.58%, Agri 24.29%, and MSME 22.94%. The bank aims to increase RAM's share of total advances to 60% by March 2026 and 70% by FY27. Concurrently, the bank is launching new digital journeys for personal, gold, and vehicle loans, with 40% of housing loans and 54% of vehicle loans already digitally assisted in Q3 FY26.

Capital Adequacy and Cost-to-Income Ratio Improvement

The bank maintains a strong Capital Adequacy Ratio (CRAR) of 16.83%, which rises to 18.01% when including nine-month profits. The Cost-to-Income Ratio improved by 373 bps year-on-year to 60.84%. Management targets to further reduce this ratio to 58-60% shortly and then to 50-55% by March 2027, primarily by increasing income generation rather than solely cutting costs.

Initiatives for Enhanced Income and Customer Protection

Core fee income grew 28.97% Y-o-Y in Q3, and non-interest income increased 50% Y-o-Y. The bank is implementing supply chain financing and cash management services by June to boost fee income. To protect customers from cyber frauds, PSB has integrated with 14C, Mule Hunter, and Enterprise Fraud Risk Management Services. Furthermore, the bank is expanding its branch network, opening new zones, and increasing BCs to 6000, alongside significant investments in HR initiatives and digital tools like AI chatbots for staff.

Deposit Mobilization and NIM Management

Deposit growth stood at 9.27% Y-o-Y, with CASA deposits growing 8.78% and retail term deposits growing 18.34% in Q3 FY26. The bank's CD ratio is around 79.24%. While NIM is currently 2.59% and under pressure, the bank aims to protect margins by focusing on higher-yielding asset segments (3-3.5% margin) and rationalizing deposit interest rates. Management expects NIM to bottom out by the end of the current or next quarter.

Corporate Loan Book and Geographical Expansion

The bank strategically shed approximately Rs.3000 crores of corporate loan book due to unfavorable pricing but still maintains a corporate loan pipeline of Rs.20,000 crore, focusing on infrastructure, LRDs, real estate, renewables, and manufacturing. PSB is expanding its business horizon across various geographies, with MD/ED visits generating at least Rs.5000 Crores of leads per visit, indicating a strong push for business mobilization in new regions.

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