Hold Punjab National Bank; target of Rs 78: Emkay Global Financial

Emkay Global Financial's research report on Punjab National Bank

PNB reported a beat on PAT, at Rs17.6bn (vs Emkay: Rs14.6bn), mainly owing to higher NII, lower staff expense and contained provisions, and partially offset by the higher tax expense. Bank’s credit growth trajectory improved to 15% YoY/3% QoQ which, coupled with better loan/investment, led to a 3bps QoQ improvement in NIM to 3.1%, while most banks saw a correction. Asset quality continues to enhance, with GNPA ratio down by 77bps QoQ to 7%, aided by lower slippages and higher recoveries/upgrades. Going ahead, PNB expects growth to remain robust, albeit NIMs to slightly soften amid rising CoF. However, better treasury gains, recovery from written-off accounts and contained LLP should support profitability. We expect the bank to note a gradual improvement in RoA/RoE to 0.7%/11% by FY26E, from a low of 0.2% in FY23.

Outlook

We retain HOLD on PNB, with new TP of Rs78/sh (earlier Rs65), rolling forward on Sep-25E ABV and subs value at Rs5/sh. Management clarified the bank is not looking to divest stake in subsidiaries, incl. its insurance business, for now.