Wash out quarter or worst behind? How to trade PNB now

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26 Aug, 2025 12:21

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Moneycontrol Bureau

Shares of Punjab National Bank were under pressure in early trade as its asset quality hit March quarter earnings. However, not all analysts are negative on the stock. According to Bank of America Merrill Lynch worst is behind us and hence retains buy rating on the stock. It feels  earnings growth is expected to rebound to 25-40 percent in FY16-17 led by unwinding of credit costs and higher recoveries. The brokerage has slashed target price to by 16 percent to Rs 185 for 18-20 percent earnings per share (EPS) cut.

“Overall stressed asset formation appears to have peaked. PNB still has strong deposit franchise and higher than average Tier 1 (9.3 percent). Finally, PNB would also benefit from the rate cuts and pick-up in growth,” it says in report.

Terming it a 'wash-out' quarter, CLSA retains outperform rating given reasonable valuations and an expected recovery in earnings profile but lowered earnings by 30 percent. "While results were weak, PNB is better placed than most PSU peers on current and savings account deposits (Casa) franchise and capital adequacy that should support higher growth. A timely appointment of fulltime MD & CEO and smooth transition will be key," it says in a report. It has a reduced target price of Rs 165 per share.

Barclays maintains an equalweight but slashed price target down by 9 percent to Rs 152 per share. It has reduced FY16-17 estimates by 18 percent and 14 percent, respectively, to incorporate the slower loan growth with a concern about PNB’s large pool of restructured assets.

Meanwhile, Credit Suisse has maintained an underperform rating with a revised target of Rs 110 from Rs 142 per share. It has cut earnings by 16-19 percent post results. "While, on a nominal basis the stock may appear cheap, given the increased under-provisioning and exposure to 'at-risk' companies forming bulk of its incremental loans, there is still further downside," it says.

Religare has also downgraded it to hold with a reduced target of Rs 150 per share as it feels asset quality and margins may be under pressure in FY16.

At 13:38 hrs Punjab National Bank was at Rs 148.00, up Rs 2.35, or 1.61 percent on the BSE.