Shares of Punjab National Bank rose over 3 percent intraday on Thursday as investors cheered an upgrade call on the stock.
The global brokerage firm believes that the incremental risk reward has turned favourable in case of the stock. The current valuation adequately captures any asset quality risks.
“The near-term provisioning will remain elevated given the lower coverage of 41%, but the large stock of prudentially written-off NPAs provides comfort on recoveries or upgrades,” the report from Nomura said.
Having said that, it said the pain point for the stock could be the pre-provisioning operating profit. The system loan growth, it added, remained anaemic at 5 percent year on year. This coupled with MCLR migration implies pressure on this to continue.
On the valuations front, it said that it revised down FY18F PAT by 56%, but FY19F remains largely unchanged.
At 11:59 hrs Punjab National Bank was quoting at Rs 142.15, up Rs 5.10, or 3.72 percent on the BSE. It touched an intraday high of Rs 142.75 and an intraday low of Rs 139.75.
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