How Non Performing Assets Impacts Bank Valuation | Banking Analysis Chapter 2

Описание: Non-Performing Assets (NPA) are one of the most important drivers of bank valuation. In this video, I explain how NPAs affect banking stocks, using Punjab National Bank (PNB) investor presentation as a real-life example.

🔹 What is NPA?
We begin by understanding what an NPA is and how loans turn from standard assets into stressed and non-performing assets.

🔹 How NPAs are created
Using insights from the PNB investor presentation, I explain key reasons behind NPA formation—economic cycles, sectoral stress, credit appraisal issues, and recovery challenges.

🔹 Gross NPA (GNPA)
Learn how Gross NPA reflects a bank’s overall asset quality and why high GNPA negatively impacts market confidence and valuation.

🔹 Provisioning Coverage Ratio (PCR)
PCR shows how much loss protection a bank has created. With reference to PNB’s provisioning strategy, we analyze why a higher PCR indicates balance-sheet strength and management prudence.

🔹 Net NPA (NNPA)
Understand why Net NPA is more relevant for investors than Gross NPA and how PNB’s improving NNPA trend impacts risk perception and valuation.

🔹 Industry Benchmarks
We compare PNB’s GNPA, NNPA, and PCR with industry benchmarks to understand where the bank stands versus peers (PSU vs private banks).

🔹 Impact on Bank Valuation
Using PNB data, we explain how NPAs influence:

Return on Assets (ROA) & Return on Equity (ROE)

Credit growth potential

Capital adequacy & cost of capital

Price-to-Book (P/B) valuation and re-rating

🔹 Investment Guidance for Banking Stocks
Based on NPA trends and investor presentation analysis:
✔ What NPA levels are acceptable for investors
✔ How to identify improving vs deteriorating banks
✔ When NPA cleanup can trigger valuation re-rating

📌 This video is especially useful for banking stock investors, equity research beginners, and long-term investors who want to analyze banks using actual investor presentations, not just headlines.