Accumulate PNB; target of Rs 850: PLilladher

“PNB’s asset quality issues continue to remain elevated with a repeat of Rs28bn (~3.8% of loans) of gross slippages. PAT was largely aided by treasury gains and writeback of investment depreciation, which otherwise was a weak operating quarter with higher opex and low recoveries from written-off accounts. PNB’s high exposure to sensitive sectors, high CDR pipeline and increasing growth in high risk sectors (Agri/Power/MSME) remains a concern. We further cut our estimate by ~4% due to lower fee income and higher opex and cut Sep-13 PT to Rs850/share. High asset quality uncertainity remains and hence, we see no near-term upside catalysts even from current levels (0.8x Sep-13 book).”

“Gross slippages of Rs28bn was significantly higher than street expectations and more than net off technical recoveries/upgrades of Rs14.5bn. Management acknowledged that growth environment remains challenging and slippages trend could continue to remain elevated. With increasing chances of a monsoon failure, possibility of higher Agri slippages/restructuring has also inched up. Growth continues to remain strong at 21% YoY but is largely driven by Agri (31% YoY) and Infra disbursements (40% YoY) which we believe are adding to asset risk in this environment,” says Prabhudas Lilladher research report.

Non-Institutions holding more than 90% in Indian cos

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