Emkay Global Financial's research report on Punjab National Bank
PNB continued to report a strong beat on PAT at Rs22bn (Emkay est.: Rs19.2bn) mainly due to contained staff cost despite wage hike provision and lower provisions due to reversal of NPI provisions on one lumpy corporate. Amid margin pressure across banks, PNB once again reported a 4bps QoQ margin expansion to 3.15% due to better LDR and interest recognition on lumpy NPA recoveries. Asset quality continued to improve, with fresh slippage run-rate now at a decadal low of 0.9% and NNPA at ~1% of loans, which should lead to a sharp reduction in LLP. The bank still operates on the old-tax regime and migration to the new regime could boost profitability. Factoring in a better margin trajectory and asset-quality improvement and migration to the new tax regime over FY25-26, we raise our FY24E/FY25/FY26E earnings estimates by 15-40% and expect the bank to deliver 0.5-1% RoA/8-14% RoE.
Outlook
Thus, we revise our TP to Rs125/share (vs. Rs78), based on 1x its Dec-25E ABV and subsidiary’s value at Rs11/share. We upgrade the stock to BUY from Reduce.
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