Buy Punjab National Bank; target of Rs 105 Sharekhan

Sharekhan's research report on Punjab National Bank

Improvement in asset quality and a strong outlook are likely to help in faster normalization of credit cost thereby improving the visibility for improvement in return ratios. The bank has been guiding that quality of loans sanctioned/disbursed in post-COVID times is far superior with very low delinquency. Thus, lower slippages trends is likely to sustain and narrow the perceived gap in underwriting with respect to peers. We have rolled forward our valuation to FY26E. At the CMP, the stock trades at 0.8x/ 0.7x its FY2025E/FY2026E BV.

Outlook

We maintain a Buy on PNB with a revised PT of Rs. 105; return ratios are set to improve sharply (RoA closer to ~1%) in FY25E.