Public sector lender, Punjab National Bank has put a good performance in the first quarter of this financial year. But a sudden rise in bad assets has become a drawback for the otherwise good show by the bank. There is however no cause for worry as the bank has made a provision coverage ratio of 77.6% for its NPAs as compared to the 70% threshold set by the banking regulator, RBI.

Despite the rise in bad assets, the non performing assets (NPAs) formed only 0.7% of the total loan book of the bank in the first quarter. This is an indicator that the asset quality of the bank is still better than other banks with industry average for decent NPA level stands at 1%.

The loan book of the second largest public sector lender has growth rate higher than the industry growth rate. Also, the string net interest margin (NIM) provides a strong backbone to its business model.

This quarter showed an improvement in the bank's NIM by 70 basis points. This led to a strong 45% growth in its net interest income (NII).

Although this quarter has not been a cakewalk for PNB but it definitely has chances of improvement. The bank has to keep a check on quality of its assets for the next few quarters.