Buy PNB with target of Rs 1315: Karvy

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Buy PNB with target of Rs 1315: Karvy

Karvy Stock Broking has upgraded Punjab National Bank (PNB) to buy rating with a target of Rs 1315 in its report dated February3, 2010.

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Karvy Stock Broking has upgraded Punjab National Bank (PNB) to buy rating with a target of Rs 1315 in its report dated February3, 2010.

"In Q3FY10, Punjab National Bank (PNB) reported strong growth of 18.6% (Y/Y) in net interest income (NII) to Rs 23.3 billion in-line with our estimates of Rs 23.8 billion; growth in NII was on the back of sharp fall of 98 bps (Y/Y) in cost of funds compared to 89 bps (Y/Y) decline in yield on funds, on sequential basis cost of funds and yield on funds declined by 40 bps and 19 bps respectively. PNB's CASA share improved to 39.5% from 38.5% in Q2FY10 and 37.4% in Q3FY09. In the quarter, core fee income reported 14% (Y/Y) growth to Rs 3.8 billion and treasury income halved to Rs 1.6 billion (including of Rs 714 million from sale of 26% in PNB Housing Finance)."

"We revise our earning estimates upward to factor in higher volume growth in credits and strong margin expansion; we increase our FY10 and FY11 earnings by 34% and 33.5% respectively and increase our target price by 20% to Rs 1,315 from previous target price of Rs 1,092 and upgrade the stock to BUY from Outperformer with a target price of Rs 1,315 at 2.2x adjusted book value FY11, "says Karvy Stock Broking.

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To read the full report click on the attachment