Neutral Punjab National Bank; target of Rs 30: Motilal Oswal

Motilal Oswal's research report on Punjab National Bank

PNB reported a weak operating performance, impacted by a 6% QoQ decline in NII, despite a loan growth of 5%. Domestic margin contracted by 15bp QoQ to 2.86%. PPOP fell 7% YoY to INR52.6b (2% miss). On the asset quality front, slippages stood elevated yet again (~6.2% annualized) at INR105b, a jump of 111% QoQ. All business segments, Retail (INR11b), Agri (INR28b), MSME (INR28b), and Corporate (residual) contributed to slippages. Total restructured book (COVID-19 and earlier schemes) stood at 2.4% of loans (v/s 2.8% in 3QFY22). Total SMA overdue (over INR50m) saw a sharp improvement QoQ at INR1.2b (0.02% of loans) as against INR30.9b (0.42% of loans) in 3QFY22. We cut our FY23/FY24 earnings estimate sharply by 23%/26% as we build in higher provisioning and project a RoA/RoE of 0.5%/6.6% by FY24. We maintain our Neutral rating.

Outlook

We cut our FY23/FY24 earnings estimate by 23%/26% as we build in higher provisioning and estimate a RoA/RoE of 0.5%/6.6% in FY24E. We maintain our Neutral rating with a TP of INR30/share (0.4x FY24E ABV).