- Punjab National Bank shares rose sharply, gaining up to 8% after Q2 results release
- Private banks ICICI, HDFC, and Axis Bank shares fell up to 5% following their earnings reports
- PNB trades below book value with improving margins and lowest net NPA among peers
When the Dalal Street opened on Monday after a spree of bank results, what stood was a clear distinction between the investor's preference for PSU banks and their cautiousness towards the private lenders. The state-run Punjab National Bank was among the most bought stocks till afternoon trade, with its stock surging nearly 8% at one point of time.
On the other hand, the three big private lenders who reported their earnings on over the weekend — ICICI Bank, HDFC Bank and Axis Bank — plunged up to 5% as the second-quarter scorecard spooked investors.
At 1:34 pm, shares of PNB rose 4.68% to Rs 121.74 at 1:34 pm on Monday, after hitting a day's high of Rs 125.22, up 7.67% from Friday's close. The state-run lender had reported its July-September results after market hours on Friday.
On the flip side, Axis Bank fell 4.23% to Rs 1,235.40, after sliding as much as 5.02% to a day's low of Rs 1,225.30. HDFC Bank dropped 2.76% to Rs 708.75, with a low of Rs 708.05, down 2.85%. ICICI Bank slipped 1.02% to Rs 1,382.80, after touching Rs 1,379.20, down 1.27%.
On the headline numbers, PNB was not the quarter's standout. Its net profit rose 12.8% year-on-year to Rs 5,532 crore. ICICI Bank's standalone profit rose 20.1% to Rs 14,843 crore, and Axis Bank's jumped 38% to Rs 7,003 crore. Only HDFC Bank grew slower, with standalone profit up 4.7% to about Rs 19,510 crore.
So why did investors reward the slowest of the three? The answer lies in what the stocks cost, what is inside the loan books, and how much of the private banks' growth came from one-offs.
Four Reasons Why
1. It trades below its own book value
PNB's shares trade at 0.89 times book value, according to Screener. In other words, investors are paying less than the bank's net worth on paper. ICICI Bank trades at 2.56 times, HDFC Bank at 1.82 times and Axis Bank at 1.68 times.
PNB's book value per share rose to Rs 123.64 at the end of September, from Rs 108.57 a year earlier. When a stock starts this cheap, even modest improvement can move the price sharply.
2. After provisions, its bad-loan book is the smallest of the four
PNB's gross non-performing asset (NPA) ratio stood at 2.55%, more than double ICICI Bank's 1.20%. Axis Bank was at 1.16% and HDFC Bank at 1.11%.
But PNB has already set aside money against most of those loans. Its provision coverage ratio, including technical write-offs, was 97.32%. That leaves a net NPA ratio of 0.25%, the lowest of the four lenders. ICICI Bank's net NPA was 0.30%, Axis Bank's 0.35% and HDFC Bank's 0.37%.
PNB is also improving faster. Its gross NPA ratio fell 90 basis points in a year, from 3.45%. ICICI Bank's fell 38 basis points and Axis Bank's 30 basis points.
3. Its margins rose while private banks' slipped
Net interest margin (NIM), the gap between what a bank earns on loans and pays on deposits, is a key gauge of profitability. PNB's domestic NIM rose to 2.74% in the September quarter from 2.64% in the June quarter. Its net interest income rose 10.8% year-on-year and 7.4% quarter-on-quarter to Rs 11,601 crore.
The private lenders moved the other way. Axis Bank's NIM fell to 3.36% from 3.46% in the previous quarter. ICICI Bank's NIM fell to 4.18% from 4.36%, or from 4.28% if a one-time gain from interest on a tax refund is excluded. HDFC Bank reported a NIM of 3.16% on total assets.
The private banks still earn far wider margins than PNB. But investors pay for direction, and this quarter PNB's margin moved up.
4. The private banks' profit growth flattered them
Axis Bank's 38% profit jump came largely off a weak base. A year earlier, its profit was hit by a one-time provision of Rs 1,231 crore. Compared with the June quarter, Axis Bank's profit actually fell 2%.
HDFC Bank's profit was dragged down by lower treasury gains, which fell to Rs 780 crore from Rs 2,390 crore a year earlier. Excluding treasury trading gains, the bank said its profit grew about 12.6%.
ICICI Bank's 20.1% growth was the strongest and cleanest of the three. But it came with a treasury loss of Rs 230 crore and the dip in margins.
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There's A Catch
PNB's quarter was not flawless, and its own filings show where the profit came from. Total provisions fell 85% to Rs 97 crore from Rs 643 crore a year earlier. That fall did much of the work in lifting profit, even though provisions for bad loans alone rose to Rs 817 crore.
Operating profit grew only 4.2% to Rs 7,532 crore, as treasury income fell 57% to Rs 753 crore. Excluding treasury income, operating profit rose about 24%, a sign that the core lending business is doing better.
The bank also fell short of some of its own FY27 targets, according to its investor presentation:
- Operating profit growth: 4.2%, against guidance of 9-10%
- Global NIM: 2.58%, against guidance of 2.60-2.70%
- Gross NPA: 2.55%, against a target of below 2.50%
Fresh slippages, or loans newly turning bad, rose 23% year-on-year to Rs 2,233 crore. Investors, in short, are paying for where PNB is heading, not for a perfect quarter.
What The Bigger Picture Shows
Monday's move comes as state-run lenders' lead over private banks has narrowed sharply this year. Over the past year, the Nifty PSU Bank index has gained 5.97%, while the Nifty Private Bank index has fallen 1.91%.
That gap was far wider in late February, when the PSU Bank index stood about 24 points ahead of the Private Bank index, with both rebased to 100. PSU bank stocks have given back much of that lead since, while private banks have recovered from their March lows.
PNB's rally on Monday suggests investors are not done with the PSU bank trade. Whether the lead widens again depends on whether other state-run lenders report similar gains in the weeks ahead.
How The Four Banks Compare
Bank | Q2 FY27 net profit (Rs crore) | Profit growth (YoY) | NIM | Gross NPA | Net NPA | Price-to-book | Share move (1:34 pm, Oct 19) |
|---|---|---|---|---|---|---|---|
PNB | 5,532 | 12.8% | 2.74% (domestic), 2.58% (global) | 2.55% | 0.25% | 0.89x | +4.68% |
ICICI Bank | 14,843 | 20.1% | 4.18% | 1.20% | 0.30% | 2.56x | -1.02% |
Axis Bank | 7,003 | 38% | 3.36% | 1.16% | 0.35% | 1.68x | -4.23% |
HDFC Bank | 19,510 | 4.7% | 3.16% (on total assets) | 1.11% | 0.37% | 1.82x | -2.76% |
Standalone figures for the quarter ended September 30, 2026. Price-to-book ratios from Screener.
The next test comes as other state-run lenders, including State Bank of India and Bank of Baroda, report their September-quarter results. If their margins and asset quality improve as PNB's did, the case for the PSU bank trade will strengthen. If not, PNB's rally may prove to be a one-day story.
ALSO READ: Axis Bank Vs HDFC Bank Vs ICICI Bank Q2 Results: Who Led On Profit, Margins And Bad Loans?
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