Motilal Oswal Financial Services recently reported that Punjab National Bank (PNB) has been demonstrating a strong financial performance, focusing on strengthening its balance sheet and maintaining a healthy bottom line.
The bank’s earnings have steadily grown, driven by controlled provisions and robust revenue generation. With a comfortable Credit-Deposit ratio, PNB is well-positioned to expand its loan book, particularly focusing on high-yielding RAM segments. The bank’s Margin Lending Rate (MCLR) repricing and effective CD ratio management are expected to safeguard its margins against elevated funding costs.
Furthermore, PNB’s asset quality has shown significant improvement, with healthy recoveries and write-offs contributing to its enhancement of its Provision Coverage Ratio to 88%.
The bank anticipates further improvement in its net Non-Performing Asset (NPA) ratio, signifying a strong grip on asset quality. The SMA overdue rate for loans over ₹5 crore remains at 0.15% of domestic loans. PNB is also committed to achieving robust recoveries at approximately twice the rate of slippages, aiming to contain credit costs and slippages at less than 1% and projecting a Return on Assets (RoA) of 1% by the end of FY25.
With a strategic resolve to fortify its balance sheet and lower the Net NPA ratio to 0.5%, PNB is anticipated to sustain its profitability. Analysts at Motilal Oswal Financial Services estimate a 44% Compound Annual Growth Rate (CAGR) in PNB’s earnings over the period FY24-26. Consequently, they have reiterated a Neutral rating for PNB with a target price of ₹130 based on 1.1x FY26E Adjusted Book Value. This underscores PNB’s potential for sustained financial strength and resilience in the coming years.