Sharekhan's research report on Punjab National Bank
Q4FY23 numbers were in line with expectations, with PAT at Rs. 1,159 crore. Provisions declined by 21% y-o-y/ 19% q-o-q. Core credit cost stood at 1.8% annualized vs 2.0% q-o-q. Net slippages were negative at Rs. 162 crore and for FY23 it stood at just 19 bps of avg. advances. SMA 1 & 2 book cumulatively now stands at ~2.1% of net advances. Asset quality improved sharply with GNPA and NNPA ratios falling by 102 bps/58 bps q-o-q to 8.74%/2.72%. PCR stood at ~71% vs. 69% q-o-q. Bank guided that credit cost for FY24 is expected at ~1.5-1.75%. Provisions would be largely related to back book (Net NPL 2.7% & Restructured book 1.3%). Thus, market may look through one-time book value adjustment. Bank is expected to further increase the coverage on bad loans in FY24.
Outlook
Quantification of incremental ECL provisions required to be maintained currently seems to be difficult and thus we await guidelines on ECL norms from RBI to get more clarity on it. At CMP, the stock trades at 0.6x/ 0.5x FY24E/FY25E BV estimates. We maintain our buy rating with an unchanged PT of Rs. 64.
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