PUNJAB NATIONAL BANK

Punjab National Bank - Company Profile

Punjab National Bank was set up in 1895 and is a Government of India undertaking and provides banking and other financial services primarily to retail and corporate clients in India. Punjab National Bank (PNB) is the third largest bank in India in terms of asset size and is currently the second largest state-owned commercial bank in India.

For FY 2014, PNB’s net interest margins stood at 3.44 % (3.52 % for FY 2013). Total deposits with the bank stood at Rs. 4,51,397 Cr. growing by 15.30 % over the previous year. For the same period, net NPA’s stood at 2.85% (2.35% for FY 2013).

As of March 31, 2014, PNB’s customer base was over 82 million and its distribution network was at 6,200 branches and 6,940 ATMs. Bank has overseas footprints in 10 countries with 4 overseas branches and an offshore banking unit in Mumbai; wholly owned subsidiary in UK with 7 branches; a subsidiary each in Kazakhstan & Bhutan; 5 Representative offices in Australia, Norway, Dubai, China and Kazakhstan; and 1 joint venture with Everest Bank Ltd., Nepal.

Punjab National Bank - STOCK INFORMATION

Punjab National Bank - STOCK FUNDAMENTALS

INVESTMENT RATIONALE

PNB’s Q2FY15 PAT at Rs 5.8bn came in sharply below estimates due to a 24bps decline in NIMs, higher staff expenses and provisions, but partly supported by greater other income. Asset quality deteriorated significantly with slippages/ restructuring remaining high at Rs 39.7bn/Rs 32.9bn (5.1%/ 4.2%). While the bank’s performance remains volatile, we are positive on the stock given a decent CETI of 8.4%, a healthy domestic CASA ratio of 40%, and reasonable valuations of 1.0x FY16E ABV "With a calibrated approach to growth, PNB is well-placed among PSU banks to benefit from an economic recovery, which in turn should translate into lower credit costs for the bank. We remain positive on the stock given Punjab National Bank (PNB’s) comfortable capital position, a healthy domestic CASA ratio, and reasonable valuations.

SHAREHOLDING PATTERN

OUTLOOK AND VALUATION

Net stress additions increased significantly QoQ. However, loan portfolio is highly levered to resolution of policy bottlenecks and improvement in economic growth. We have cut the PAT estimates by 20%+ to factor higher credit costs and weak margins. Despite factoring a high credit cost of 1.6% and 36% tax rate, FY15E PAT is expected to grow 27% YoY. Focus on profitable growth, healthy core NIM, CET1 of ~8.4% are certain positives for PNB. Maintain Buy.

RESULTS (Quarterly )(Rs CR.)

Punjab National Bank - TECHNICAL VIEW

Punjab National Bank (PNB) is looking strong on charts. We advise to buy around 1100-1125 with stoploss of 1060 for the targets of 1160-1200 levels. RSI is also showing upside momentum in it

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