Punjab National Bank - Lower Credit Cost To Drive RoA Improvement: Nirmal Bang

NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..Nirmal Bang Report.We hosted the management of Punjab National Bank in order to gain insights into the bank’s business outlook. Based on queries by institutional investors, following are the key takeaways:FY25 guidance on key financial parameters maintained: loan growth – 11-12%; net interest margin – 2.9-3%; credit cost - <1%; exit return on asset of 1% in FY25; RoA of 0.8% in FY25.With comfortable LDR (70%), higher LCR (150%) and excess SLR (Rs 700- 800 billion), the bank has good liquidity position to support credit growth.Proportion of RAM to improve to 60% in two-three years.NIM to be lower than last year due to competition in AAA-rated corporate loans.Recoveries per quarter to be Rs 45-50 billion in FY25. Due to provision coverage ratio (including technical write-offs at 95%), the requirement of ageing provisions has abated. Incremental credit cost will also be lower due to lower slippages target of <1%.The bank does not expect any major impact of loan waivers being announced by state governments as it will be compensated by the respective states.PNB has obtained Board’s approval for raising Rs 75 billion through QIP, Rs 70 billion in AT-1 bonds and Rs30bn via Tier-II bonds. The CET-1 will be positively impacted by Rs 6-7 billion due to new investment norms..With continued traction in recoveries, lower slippages and falling requirement for aging provisions, we have reduced our credit cost estimate for FY26 from 1.1% to 0.9%. We have revised our earnings estimates by 9.9%, which results in a RoA/RoE of 0.9%/13.2% in FY26E. Valuing PNB at 1.1 times its FY26E adjusted book value (versus one time FY26E ABV earlier), we have raised our target price from Rs 110 to Rs 120. We have upgraded our rating from a ‘Sell’ to an ‘Accumulate’..Click on the attachment to read the full report:.Tata Chemicals - Weak Soda Ash Outlook Dampens Cautious Optimism: Nirmal Bang.DISCLAIMERThis report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Punjab National Bank - Lower Credit Cost To Drive RoA Improvement: Nirmal Bang

Loan growth guidance for FY25 maintained at 11-12%

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