Buy Punjab National Bank Ltd For Target Rs. 126 By Geojit Financial Services Ltd
Robust quarter, asset quality improved
Punjab National Bank (PNB), a leading Indian public sector bank, provides corporate and personal banking services. It has 10,189 branches and 11,822 ATMs.
• PNB's standalone interest income grew 13.8% YoY to Rs. 31,989cr in Q4FY25, driven by a rise in interest earned from loans (+10.5% YoY), income from investments (+15.1% YoY), and bank funds (+45.3% YoY). Interest expenses, on the other hand, jumped 19.6% YoY to Rs. 21,232cr, due to higher deposit costs. Thus, net interest income rose 3.8% YoY to Rs. 10,757cr.
• Net interest margin (NIM) shrunk 29bps YoY to 2.81% in Q4FY25, due to a higher cost of deposit and a drop in yield on advances.
• Pre-provision profit rose 5.6% YoY to Rs. 6,776cr in Q4FY25, fueled by higher net interest income and non-interest income (+11.0% YoY).
• Cost to income ratio largely remained flat at 56.21% in Q4FY25 (56.09% in Q4FY24), due to higher costs associated with deposits. However, staff expenses to income declined to 37.44% from 38.53% in Q4FY24.
• Reported profit after tax jumped 54.7% YoY to Rs. 4,657cr due to a sharp 77.4% fall in provisions.
Outlook & Valuation
PNB reported a satisfactory Q4FY25 performance, driven by robust growth in its loan book and deposits. Looking ahead, the bank's strategic focus on retail, agricultural, and small business lending is poised to fuel expansion. Meanwhile, the improving asset quality ratios, strengthening recovery prospects, robust deposit and credit growth, and reduced credit costs are expected to support overall performance. Additionally, the transition to the new tax regime is expected to boost profitability. Therefore, we reiterate our BUY rating on the stock, based on 0.9x FY27E BVPS, with a rolled-forward target price of Rs. 126
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SEBI Registration Number: INH20000034
