Buy Punjab National Bank; target of Rs 140: Sharekhan

Sharekhan's research report on Punjab National Bank

Sustained improvement in asset quality trends is resulting in lower credit cost. Earnings were above estimates in Q1FY25 driven by lower credit cost resulting in RoA at 0.82%. Core credit cost stood at 41 bps annualised vs 85 bps q-o-q. Business momentum was also strong. Advances/ deposits grew by 5% q-o-q/ 3% q-o-q. However, PPoP growth was soft (10% y-o-y) mainly due to lower other income but Core PPoP was healthy, rising 17% y-o-y. The bank expects to achieve its RoA guidance of ~1% even before Q4FY25 as credit cost guidance has been revised to 0.5% of advances vs earlier of ~1% for FY25, which is a key positive.

Outlook

Stock trades at 1.1x/ 1.0x its FY2025E/FY2026E ABV. We maintain Buy with an unchanged PT of Rs. 140.

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