Prabhudas Lilladher recommended Hold rating on Punjab National Bank with a target price of Rs 37 in its research report dated August 25, 2020.
Prabhudas Lilladher's research report on Punjab National Bank
PNB earnings were in-line but remained modest despite support from better treasury gains & NII. Overall earnings picture post merger remains weak as large part of operating profits will be still utilized for higher provisions (i) for legacy accounts where PCR is at 65% and (ii) COVID impact provisions as moratorium remains high. CET-I at 9.4% may be on border levels, but any movement on non-core assets & better recoveries may help to sustain for time being. Steady asset quality has been the only breather with lower slippages and may continue as restructuring will like keep slippages on lower side.
Outlook
We adjust our numbers for merger with high credit cost ambiguity ahead, while bank had not yet adjusted its DTA to move to new tax regime which may reflect in earnings, we re-instate a HOLD (from BUY) rating with TP of Rs37 (0.6x Mar ABV).
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