Buy Punjab National Bank; target of Rs 125: Sharekhan

Sharekhan's research report on Punjab National Bank

PNB reported 145% y-o-y earnings growth aided by ~92% y-o-y decline in provisions and ~10% y-o-y growth in operating profit resulting in RoA/RoE at 1.0%/ 14.7%. Bad loan recoveries stayed strong leading to net slippages negative at Rs. 734 crore. Net NPL ratio touched ~0.46% (lowest in decadal) and better than its large peers. Business momentum was healthy. Advances/ deposits grew by 4% q-o-q/ 4% q-o-q. However, core PPoP was weak, declined by 11% y-o-y led by higher employee benefit provisions under IND AS-15 along with muted NII/ fee. NIMs fell by 15 bps q-o-q to 2.9%. Stock trades at 0.9x/ 0.8x its FY2025E/FY2026E ABV.

Outlook

We maintain Buy with a revised PT of Rs. 125, given bad loan recoveries to continue to drive profitability and support RoA trajectory as the overall bad loan pool is still quite large at ~Rs140,000 crore.

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