Following Punjab National Bank’s September-quarter results, Nirmal Bang has increased earnings by 5-8%. This is driven by higher net interest margin of 3-4 basis points for FY27E/FY28E and lower credit costs in FY27E (with very benign H1 and write-backs). Other income has been reduced 2% with lower treasury income.The brokerage believes PNB’s valuation remains attractive at 0.73 times forward book value, while an improving net interest margin (NIM) profile and healthy loan growth provide support to its return ratios.
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Nirmal Bang Report
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Punjab National Bank (PNB) has received a rating upgrade from Nirmal Bang Institutional Equities, with the brokerage moving the stock to ‘Buy’ from ‘Hold’ and revising its target price to Rs 137. The brokerage believes PNB’s valuation remains attractive at 0.73 times forward book value, while an improving net interest margin (NIM) profile and healthy loan growth provide support to its return ratios.
Following Punjab National Bank’s September-quarter results, Nirmal Bang has increased earnings by 5-8%. This is driven by higher net interest margin of 3-4 basis points for FY27E/FY28E and lower credit costs in FY27E (with very benign H1 and write-backs). Other income has been reduced 2% with lower treasury income.
Looking ahead, the brokerage believes that loan growth momentum should remain healthy. Margin improvement is also likely to continue, aided by rate hikes and continued improvement of mix in favour of higher yield loans.
Operating costs are expected to remain well contained. Asset quality is to remain benign but credit costs could normalize from very low levels (including from lower write-off opportunities).
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Recoveries are also likely to moderate, tempering profitability to some extent, which will be partly offset by improved fee income momentum. Overall, Nirmal Bang see ROA of 1% to sustain in FY27E (H1 FY27 ROA of 1.05%).
The brokerage expect ROA of 0.95% in FY28E–FY29E (vs 0.9% earlier), supported by an improved NIM profile.
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