Sharekhan's research report on Punjab National Bank
PNB reported strong growth in PPoP (up 38% y-o-y/3% q-o-q), driven by sharp improvement in NIMs (up 21 bps q-o-q/61 bps y-o-y) and healthy loan growth (15% y-o-y/4% q-o-q). However, total credit cost was higher reported at 2.6% (annualized of average advances) led by higher provisions on investments. Thus, PBT was down 13% y-o-y at Rs. 661 crore with ROA (post tax) just at 12 bps annualized. Slippages were down by 8% q-o-q at 3.6% (annualized) vs. 3.9% q-o-q coupled with higher recoveries and upgrades and contained write-offs. Asset quality saw sharp improvement with GNPA and NNPA ratios falling by 79 bps/48 bps q-o-q to 10.48%/3.80%. PCR stood at 66% vs. 65% q-o-q. The stock currently trades at 0.6x/0.6x its FY2023E/FY2024E ABV, which reflects weak business franchise and below-par return profile.
We believe higher stress in books compared with peers and lower core operating profitability would keep return ratio below par. We maintain our Hold rating with a revised PT of Rs. 52.
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