J.P. Morgan raises target price for Punjab National Bank; sees 26% upside

J.P. Morgan has upgraded Punjab National Bank (PNB) from a long standing 'underweight' to 'overweight' stance. The brokerage has also raised the target price on the stock to Rs 72 and sees an upside of over 26 percent from current market price.

According to J.P. Morgan , the bank's Q2 shows that net slippages have got into negative territory and recovery momentum is outpacing new non-performing loan (NPL) creation. Also, there is minimal stress in corporate loans. Provisions hence are largely related to back book (net NPL 3.8 percent, restructured 1.7 percent) which are higher than State Bank of India and Bank of Baroda and the market will likely look through it via a one-time book value adjustment, it said.

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"Capital and liquidity is reasonably comfortable with Common Equity Tier 1 capital (CET-1) at 10.9 percent and Liquidity Coverage Ratio (LCR) at 160 percent in an environment of tighter deposits at private banks. The stock has seen a re-rating led outperformance recently (+44 percent in 3-month against Bank Nifty of +8 percent) and we believe that, with limited new stress formation and system growth outlook improving, this trend could continue in the near term," the brokerage added.