Punjab National Bank (PNB) Share Price Target at Rs 125: Motilal Oswal Research Suggests BUY
Motilal Oswal Financial Services has revised its outlook on Punjab National Bank (PNB), recommending a BUY call with a target price of Rs 125. The research highlights improved asset quality, robust loan growth, and strong recovery in non-performing assets (NPAs). Key indicators such as net profit, provisions, and credit growth trends indicate an optimistic outlook for the bank. With improving net interest margins (NIMs) and disciplined cost control, PNB is positioned to achieve better returns for its investors in the coming quarters.
Quarterly Highlights: Profit Surge and Stable Growth
Significant PAT Growth:
PNB reported a net profit (PAT) of Rs 45.1 billion in Q3FY25, showcasing a 103% year-on-year (YoY) increase, driven primarily by provision reversals.
Loan and Deposit Growth:
The loan book expanded by 16.8% YoY to Rs 10.7 trillion, fueled by strong performance in retail, agriculture, and MSME lending. Deposits also surged by 15.6% YoY to Rs 15.3 trillion, ensuring a comfortable Credit-Deposit (C/D) ratio of 70%.
Improved Asset Quality:
Gross non-performing assets (GNPA) declined to 4.09%, while net NPA (NNPA) fell to 0.41%, supported by a 90.2% provision coverage ratio (PCR). These improvements underscore the bank’s capacity to sustain lower credit costs.
Financial Performance Metrics
| Metric | Q3FY25 | Growth YoY |
|---|---|---|
| Net Interest Income | Rs 110.3 billion | +7% |
| Other Income | Rs 34.1 billion | +28% |
| Operating Profit | Rs 66.2 billion | +5% |
| Net Profit (PAT) | Rs 45.1 billion | +103% |
These figures reflect the bank’s ability to maintain a stable margin profile and efficient operations despite fluctuating market conditions.
Technical and Fundamental Analysis
Net Interest Margin (NIM) Stability:
PNB’s NIM stood at 2.93%, with domestic NIMs improving slightly to 3.09%. This improvement is attributed to enhanced asset yields and repricing within the corporate loan book.
Provisions and Write-Backs:
The bank experienced a significant reversal in provisions for the quarter, reducing overall provisioning requirements and boosting profitability.
Management Guidance and Strategic Initiatives
Recovery Pipeline and NPA Management:
The bank aims to recover Rs 50-60 billion in Q4FY25. Its TWO pool (technical write-offs) provides a cushion for further recovery gains, particularly from cases under the National Company Law Tribunal (NCLT).
Focus on Retail, Agri, and MSME (RAM) Segments:
PNB intends to increase its exposure in RAM loans, which currently comprise 56% of the total loan portfolio. This strategic focus is expected to yield stable returns and improve the bank’s risk profile.
Digital Banking Expansion:
The bank has doubled transaction volumes on its digital platforms, demonstrating significant progress in enhancing customer engagement and operational efficiency through technology.
Conclusion
Punjab National Bank has demonstrated remarkable improvements in profitability, asset quality, and operational efficiency. With continued recovery efforts, focus on RAM segments, and enhanced digital banking initiatives, the bank is well-positioned to achieve sustained growth. Motilal Oswal’s upgraded BUY recommendation and target price of Rs 125 underscore the stock’s strong investment appeal in the current financial landscape.
