Emkay Global Financial is bearish on Punjab National Bank has recommended sell rating on the stock with a target price of Rs 30 in its research report dated June 21, 2020.
Emkay Global Financial's report on Punjab National Bank
Despite higher margins and other income, PNB once again reported a loss of Rs7bn, mainly due to higher NPA provisions in the quest to improve specific PCR. However, for full year FY20, the bank returned to profit after a gap of two years. Credit growth during Q4 was far better at 11% qoq/3% yoy, mainly led by strong growth in the corporate book, leading to better LDR and thus, margins stood at 2.4% (up 13bps qoq). Gross fresh slippages remained elevated at Rs50.2bn/4.4% of loans, however, higher write-offs led to lower NPAs qoq. This, coupled with higher credit growth, led to 210bps qoq improvement in GNPA ratio to 14.2%. Specific PCR also improved to 63%.
Outlook
PNB continues to trade at rich valuations – 0.8x FY22 ABV (unadjusted post results). Currently, we have a Sell rating on the stock due to its weak asset quality, poor return ratios, weak internal controls and merger overhang with OBC/United Bank.
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