Punjab National Bank share price target

ICICI Securities Ltd | Retail Equity Research Asset quality remained healthy with flattish GNPA at | 57519 crore & NNPA at | 34076 crore. Led by growth, GNPA & NNPA ratio declined by 119 bps & 89 bps to 12.11% & 7.55%, respectively. Slippage came lower at ~| 3174 crore vs | 3460 crore in Q2FY18 NII growth came at 6.9% YoY to | 3989 crore. Other income grew 22.6% YoY to | 3082 crore, led by stake sale in home loan subsidiary. Advances surged 17% YoY, led by 22% YoY growth in domestic book...

PNB reported PPoP of INR42.4b (+29.5%/52.7% QoQ/YoY; in-line), supported by higher-than-expected other income (11% beat, even after considering PNBHF stake sale gains) and lower-than-expected opex due to controlled employee expense. Provisions of INR44.7b (35% higher) led to PBT loss of INR2.2b. Slippages moderated to INR31.7b (2.8% annualized), but strong loan growth enabled 121bp/89bp QoQ improvement in the GNPL/NNPL ratios. Coverage ratio stood largely unchanged at 40.8%. PNB needs to make total additional provisions of INR10.58b toward NCLT in 4QFY18. Stressed assets stood at INR671.3b (14.1% of advances) v/s INR728.5b as on 3QFY17. Domestic NIM for 9MFY18 shrunk 17bp YoY to 2.59%, with a 30bp decline in cost of funds and a 42bp decline in yield on advances YoY. Loan book grew 10%/17% QoQ/YoY, driven by retail, agri and MSME loans. Retail loans grew 5%/22% QQ/YoY, driven by 22% YoY growth in housing loans.

PNBs Q2 PAT at Rs 5.6 bn (up 2% YoY), higher than our and street's estimate, was aided by lower-than-expected provisions. Asset quality improved slightly with GNPA/NNPA ratio declining by 35/23bps QoQ to 13.3%/8.4%.

Though we believe PNB will be one of the major beneficiaries of recently announced mega PSB recapitalisation plan, we expect its credit cost to rise in the medium-term, which will adversely impact its earnings over next 2-3 quarters. Further, the Government of India is mulling consolidation of PSBs, which creates a very high level of uncertainty for the banks' future earnings trajectory. We expect the Bank would continue to witness elevated level of credit cost, which will keep its earnings and return ratios subdued over next 3-6 quarters. Hence, we continue to maintain our HOLD recommendation on the stock with a revised SOTP-based Target Price of Rs187 (from Rs167 earlier) based on 1.2x FY19 Adj. BV implying standalone value at of...

ICICI Securities Ltd | Retail Equity Research Post surge in GNPA in Q1FY18, asset quality came in healthy with flattish NPA numbers. GNPA was at | 57631 crore and NNPA at | 34570 crore. GNPA & NNPA ratio declined 35 bps & 23 bps to...

Domestic NIM improved 8bp QoQ to 2.64%, with a 4bp decline in cost of funds and a 3bp increase in yield on advances. Loan book grew 3%/4% QoQ/YoY, impacted by muted growth in the corporate segment. Retail loans grew 5%/16% QoQ/YoY, driven by 34% YoY growth in housing loans. Other highlights: a) CASA deposits grew 19% YoY, driven by 21% YoY growth in SA deposits; average CASA ratio stood at ~44.4% v/s 44% a quarter ago and 42.1% a year ago. b) Fee income growth was strong at 15% YoY, helped by better retail fees. c) CET1 ratio of ~7.67% remains a concern ...

PNBs reported PAT was higher at Rs 3.4 bn (up 12% YoY), aided by lower than expected provisions; however, management guided for ~Rs 20 bn PAT in FY18 which is much lower than our and Street estimates. GNPA ratio increased 113 bps QoQ to 13.7% with a coverage ratio of ~40%.

Advances growth for the bank has been muted at just 2.1% yoy and -4.7% qoq. On back of such growth and compression in NIMs (of 15 bps yoy), NII has grown at 4.2% yoy. On qoq basis, NIMs expanded by 10 bps (yield on advances up 79 bps), and as a result, NII growth was 4.7%. Total income growth was 10.5% yoy (driven by non-interest income growth of 22.7%) and -8.8% qoq (driven by 24.8% de-growth in non-interest income). On the operational expense front, the bank has performed well with cost/income improving by 164 bps yoy to 48% (qoq not comparable on account of excess fair value of plan assets over PV of obligation in Q4FY17). As a result, pre-provisioning profit is up 14.1% yoy. Credit costs for the bank were at 2.6% (vs. 2.3% in Q1FY17 and 5.5% in Q4FY17). PAT has grown by 12.1% qoq (31.1% yoy) with RoA at 0.19% (vs. 0.19% for Q1FY17 and 0.15% for Q4FY17). Gross NPAs grew by 2% yoy and 4% qoq, thus forming 13.66% of the advances (up 113 bps qoq, down 9 bps yoy). While the growth in absolute...

Credit Cost to Remain Elevated; Reiterate HOLD Punjab National Bank (PNB) has delivered a healthy performance in 1QFY18. Its PAT surged by 12.1% YoY and 31.2% QoQ to Rs3.4bn led by lower provisioning expenses (-4.7% YoY & -54.7% QoQ to Rs26.1bn) and higher treasury and exchange income (+47.2% YoY and +0.3% QoQ to Rs10.7bn). Fresh slippages declined to Rs66.5bn in 1QFY18 vs. Rs69bn in 4QFY17 and Rs92.3bn in 1QFY17. On QoQ basis, PNB's loan book dipped by 4.7% owing to 17.8%, 4% and 3.3% QoQ decline in overseas, MSME and large corporate loan book, respectively. However, PNB witnessed...

ICICI Securities Ltd | Retail Equity Research Asset quality pressure continued with fresh slippages at ~| 6018 crore, lower compared to previous quarters. Fall from corporate segment and | 865 crore from RA book added to slippages. GNPA ratio rose ~113 bps QoQ to 13.66%. Led by slippages, restructured assets declined further to | 11051 crore vs. | 11932 crore in Q4FY17 Other income (restated) saw robust growth at 22.7% YoY. There was healthy fee based income growth at 31% YoY. PPP was at | 3217...