Reiterating its optimistic stance, Motilal Oswal believes PNB remains well‑positioned to deliver improved return ratios as the credit cycle strengthens and provisioning buffers stabilise.
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Motilal Oswal Report
Motilal Oswal has reiterated its Buy rating on Punjab National Bank, maintaining a target price of Rs 145, even as the lender reported a modest quarter marked by a slight dip in margins but steady progress in asset quality and recoveries.
PNB's net interest margin declined by 8 basis points QoQ, impacted largely by faster growth in corporate and international advances, which carry relatively lower yields. Despite the margin compression, the brokerage noted that overall business growth remained healthy, supported by traction across both loan and deposit segments.
The bank created floating provisions worth Rs 9,600 crore during the quarter, prudently using gains from the partial stake sale in Canara HSBC Life Insurance. Motilal Oswal highlighted that PNB faces an estimated ECL transition impact of Rs 9,000–10,000 crore, against which it currently holds a floating provision buffer of Rs 1,780 crore, offering some near‑term comfort.
Motilal Oswal trimmed its FY27E/FY28E earnings estimates by 3% and 4%, respectively, factoring in the margin pressure and provision adjustments. The brokerage now forecasts FY27 RoA/RoE at 1.02% and 15.1%, indicating a stable medium‑term profitability trajectory.
Reiterating its optimistic stance, the brokerage believes PNB remains well‑positioned to deliver improved return ratios as the credit cycle strengthens and provisioning buffers stabilize.
The Buy rating is premised on 1.0x Sep'27E adjusted book value, implying meaningful upside from current levels.
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