Loans Bad Credit Online – PNB share price: Punjab National Bank (PNB) is a BUY, details highlighted for INVESTORS
PNB Share price: PNB emerged stronger during the pandemic year FY21 compared to the previous financial year. The absolute GNPA declined 6% YoY to Rs 1 tn and absolute NNPA stood flat at Rs 385bn. Provision coverage for bad loans improved to 80.1%. Moreover, the NII/NIM drag down in 4QFY21 is insignificant due to the onetime impact of interest reversal from proform slippages. Furthermore, Deposit growth was stable, with healthy CASA growth of 11% YoY, driven by strong growth in saving deposits (12% YoY) and CASA ratio improving to 45%. LKP Securities recommends BUY on PNB with a potential upside of 20%.
The major concerns of higher SMA 2 (5% of book) and restructured (0.4% of book) are already in the price. The bank expects a bulky resolution in FY22E. The asset quality concerns are likely to be absorbed by internal accruals and we estimate a maximum net-worth erosion of 20%. Inexpensive valuation of 0.5x PBVPS and strong associates (PNB Housing, PNB Gilts) makes PNB a contra play and LKP Securities recommend a BUY. Rohit Singre, Senior Technical Research Analyst at LKP Securities said that overall structure of PNB is positive, immediate support is at Rs 40 and hurdle is around Rs 45 on PNB.
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PNB’s Reported GNPA ratio improved to 14.1% from pro forma 14.7% in 3QFY21, driven by higher recovery and write-offs. Overall domestic CASA ratio remains high and healthy at 45%, leading to lower cost of funds. However, NIM contracted 41bps QoQ to 2.7% due to the continuation of subdued growth/lower LDR, higher interest reversals on NPAs and interest waiver due to the Supreme Court order. PNB Bank has guided for 8% credit growth in FY22 on the back of improved secured retail momentum and some back-end support from Corporates & SME.
PNB’s Outlook and Valuation:
Factoring near term stress from restructured books, we expect the bank’s loan book to fatten cautiously at a CAGR of 10% over FY21-24E, led by retail book growth. In our opinion, the bank’s credit cost will normalise by FY23E and estimate return ratio ROA/ROE of 0.2% and 3% in FY23E. LKP Securities value the standalone entity at 0.5xFY23E BVPS (Rs 90.5) and value of associates and subsidiaries at Rs 5 to arrive at a target price of Rs 50. LKP Securities recommends BUY on PNB with a potential upside of 20%.
Loans Bad Credit Online - PNB share price: Punjab National Bank (PNB) is a BUY, details highlighted for INVESTORS
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