Buy PNB; target of Rs 1250: Karvy Stock Broking

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Buy PNB; target of Rs 1250: Karvy Stock Broking

Karvy Stock Broking is bullish on Punjab National Bank (PNB) and has recommended buy rating on the stock with a target of Rs 1250 in its November 2, 2011 research report.

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Karvy Stock Broking is bullish on Punjab National Bank (PNB) and has recommended buy rating on the stock with a target of Rs 1250 in its November 2, 2011 research report.

"State- run lender Punjab National Bank (PNB) has posted Rs. 12.1 bn net profit in Q2FY12, registering a rise of 12% on YoY basis (up 9% QoQ)- inline with our estimate. Its NII grew 16% YoY (up 11% QoQ) to Rs. 34.5 bn in Q2FY12 - higher than our estimate of Rs. 32.4 bn. The Bank's Non- Interest Income rose 24% YoY (down 18% QoQ) to Rs. 8.9 bn, while its operating profit grew 20% YoY (down 2% QoQ) to Rs. 25.3 bn in Q2FY12 - higher than our estimate of Rs. 23.2 bn. The Bank's NIM improved by 11 bps QoQ, and continued to remain healthy at 3.95% in the reporting quarter. Its provisions and contingencies were high due to higher provisions for restructured loans and investment depreciation owing to increasing G-sec yields."

"The Bank's total business grew 22.5% YoY (up 4.2% QoQ) to Rs. 5.9 trillion in Q2FY12. Its advances grew 19.3% YoY (up 2.5% QoQ) to Rs. 2.5 trillion, while deposits rose 25% YoY (up 5.5% QoQ) to Rs. 3.42 trillion in Q2FY12. While the Bank's CASA deposits rose 11.7% YoY (up 2.3% QoQ) to Rs. 1.24 trillion, its CASA share remained stable at 37.1% in Q2FY12. The Bank's NIM improved by 11 bps sequentially to 3.95% in Q2FY12, as yield on funds increased by 31 bps to 9.01% and lesser increase in cost of funds by 10 bps to 5.54%. Its Management has given a conservative guidance for NIM of 3.5% for FY12E. The Bank's Non- Interest Income rose 24% YoY (down 18% QoQ) to Rs. 8.9 bn in Q2FY12. The growth in fee income continued to remain healthy at 25% YoY to Rs. 6.9 bn, although 13% QoQ decline reflects seasonal factor, as the Bank charges the entire processing fee in the first quarter for the whole year. Its treasury income rose 39% YoY (up 10% QoQ) to Rs. 530 mn in Q2FY12."

"During the quarter under review, the Bank's performance was in- line with our expectation. Its NII growth continued to be healthy backed by improving margins and strong loan growth. Slippages continued to remain high due to adopting system- based NPA identification. Though the Bank restructured loans worth Rs. 45 bn reflecting stress on the asset quality, its core operating performance remained strong and NIM showed improvement sequentially. During the quarter, Bank's provisions were high on account of provisions made for restructured loans and provision for investment depreciation. While maintaining our earnings estimates for FY12E & FY13E, respectively we have retained our target price of Rs. 1250 per share at 1.39x FY13E adjusted book value, and continue to maintain our 'BUY' recommendation on the stock," says Karvy Stock Broking research report.   

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To read the full report click on the attachment