Buy Punjab National Bank; target of Rs 1275: Motilal Oswal

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Buy Punjab National Bank; target of Rs 1275: Motilal Oswal

Motilal Oswal is bullish on Punjab National Bank (PNB) and has recommended buy rating on the stock with a target of Rs 1275 in its February 1, 2012 research report.

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Motilal Oswal is bullish on Punjab National Bank (PNB) and has recommended buy rating on the stock with a target of Rs 1275 in its February 1, 2012 research report.

"Punjab National Bank's (PNB) 3QFY12 PAT grew 6% YoY to INR11.5b (v/s est. of INR13.1b). While operating profit was 4% above estimates, higher-than-expected provision led to lower-than-estimated PAT."

"Gross slippages during the quarter stood at INR16.8b v/s INR9.9b in 2QFY12 which included one large account in aviation segment. The annualized slippage ratio for 3QFY12 was at 3% v/s 1.9% in 2QFY12. In 3QFY12, recoveries and upgradation stood at INR3.6b v/s INR7.2b in 2QFY12 and INR15.8b in FY11. PNB restructured loans of INR19b (70bp of loans) in 3QFY12, of which INR10b was due to one large account in telecom segment (on which NPV hit was INR1.5b). Outstanding standard restructured loans (net of repayments and NPAs) stood at INR155.5b. While yield on loans improved 5bp QoQ to ~12%, cost of deposits increased 22bp QoQ to 6.7% leading to margin contraction. Core fee income grew 10% QoQ and 23% YoY to IN6.1b in 3QFY12. Strong growth was witnessed across different streams of fee income. Loans grew 5.5% QoQ and ~19% YoY to INR2.6t, deposits grew ~4% QoQ and 23% YoY to INR3.6t. CASA growth moderated to ~12% YoY as a result of which CASA ratio declined 90bp to 36.2%."

"We expect RoA to remain strong at ~1.2% and RoE at ~22% over FY12/13. We expect PNB to report earnings CAGR of 14% over FY11-13. The stock trades at 1.2x FY12 BV and 1x FY13 BV. We maintain Buy," says Motilal Oswal research report.   

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To read the full report click on the attachment