Punjab National Bank: Buy, hold or sell post Q2 results? MOFSL shares target

MOFSL on Saturday revised upward its target on Punjab National Bank (PNB), while keeping 'Buy' rating intact, citing September quarter earnings beat, led by controlled provisions and opex. The domestic brokerage said PNB's Q2 margins expanded 8 basis points (bps) sequentially and provisions fell, reflecting strong asset quality, even as the lender created additional standard asset provisions to facilitate a smoother transition to ECL. 
While suggesting a target price of Rs 140 on the PNB stock, MOFSL said PNB has lowered its one-time ECL impact guidance to Rs 8,000 crore. "Asset quality trends remained healthy, with marginal uptick in slippages driven by a single infrastructure corporate account and no significant stress elsewhere in the portfolio. The management guided for RoA of 1 per cent and credit cost of 0.25–0.30 per cent. We estimate FY27E RoA/RoE of 1.05 per cent/15.5 per cent and reiterate our BUY rating with a revised target of Rs 140," MOFSL said.

PNB reported a 12.8 per cent year-on-year (YoY) jump in net profit at Rs 5,532 crore in Q2 compared with Rs 4,904 crore YoY. Its global net interest margin (NIM) improved to 2.58 per cent in Q2 FY27 from 2.50 per cent in Q1FY27.

Net Interest Income (NII) for the quarter came in at Rs 11,601 crore, beating MOFSL estimates by 4 per cent.  Gross non-performing assets (GNPA) declined Rs 6,153 crore to Rs 34,190 crore in Q2 from Rs 40,343 crore YoY.

MOFSL said slippages increased for the quarter rose 15.1 per cent QoQ to Rs 2,395 crore due to a slippage in a corporate segment – road account.

"Around 56 per cent of the loan book is repo-linked and reprices the following day. The
bank expects 25 bps repo rate hike to support NIM by 7–9 bps and yield on advances by 10 bps in the coming quarter," MOFSL said.