Buy Punjab National Bank; target of Rs 111: Geojit Financial Services

Geojit Financial Services research report on Punjab National Bank

In Q2FY25, PNB’s standalone interest income rose 13.4% YoY to Rs. 29,875cr, fuelled by strong growth in interest on advances (+14.7% YoY), bank funds (+14.8% YoY) and investment income (+8.8% YoY). Interest expenses surged 17.8% YoY to Rs.19,358cr, primarily due to rise in the cost of deposits. As a result, net interest income (NII) grew 6.0% YoY to Rs. 10,517cr. However, the net interest margin (NIM) contracted by 19bps YoY to 2.9% during Q2FY25. Cost to income ratio increased to 54.6% (vs 52.0% in Q2FY24), largely attributed to elevated deposit costs. Moreover, staff cost to income ratio increased to 38.1% , due to creation of AS 15 wage related provisions. Profit after tax (PAT) soared 145.1% YoY to Rs. 4,303cr, driven by higher other income (+51.0% YoY) and substantial decrease in provisions (-91.6% YoY).

Outlook

Additionally, the company plans to increase the proportion of RAM portfolio, enhancing overall profitability. Therefore, we upgrade our BUY rating on the stock, based on 0.9x FY26E BVPS, with a revised target price of Rs. 111.

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