PNB shares hit seven-month high as Q2 earnings beat estimates; check price targets

Brokerage Motilal Oswal has a buy call on the stock with a target price of Rs 140, an upside of 21% to the current market price.

The brokerage said the lender reported a strong quarter, with earnings beat led by controlled provisions and opex, while margins expanded 8 basis points QoQ.

Provisions came in lower, reflecting strong asset quality, even as they created additional standard asset provisions to facilitate a smoother transition to Expected Credit Loss (ECL). The bank lowered its one-time ECL impact guidance to Rs 8,000 crore.

Asset quality trends remained healthy, with marginal uptick in slippages driven by a single infrastructure corporate account and no significant stress elsewhere in the portfolio. Management guided for RoA of greater than 1% and credit cost of 0.25–0.30%. The brokerage estimates FY27E RoA/RoE of 1.05%/15.5%.

Global investment bank Jefferies said for Q2, PNB's profit of Rs 5,500 crore (+13% YoY) was ahead of its estimates with better net interest income (NII), higher treasury and lower provisions, that offset higher operating expenditure.

Jefferies raised estimates for better Net Interest Margin (NIMs) given the rate hikes & roll forward price target to Rs 140 with a buy call.

PNB's NII growth of 11% YoY was ahead of estimate as NIM of 2.6% was ahead of expectations aided by upward repricing of loans and fall in cost of funds, it added.

Jefferies raised FY27E earnings by 17%, reflecting September quarter trends, margin upside and lower contingency buffers, partly offset by lower treasury gains. FY28-29E earnings estimates rose 8%.

In Bull case scenario, the price target stands at Rs 150, an upside of 29%. It expects loan growth CAGR of 14% (FY26-29E) and net interest margins (NIMs) around 2.6% (average FY26-29E)

In case of downside scenario, the stock has target price of Rs 104, a fall 10% from the previous close, Jefferies added.

Elara Securities has a buy call on the stock with a target price of Rs 140, an upside of 21%.

The brokerage said PNB delivered a decent operating performance, with improved margin profile and controlled opex expected to support RoA of 1%+ going forward.

While operating trends remain somewhat volatile, sustained execution and further improvement in core metrics could help bridge valuation gap.

The brokerage gave a BUY call, with a target price of Rs 140, based on 1.0x Sep-28E P/ABV.

Key risks for PNB are lower recoveries from written off accounts and higher-than-expected ECL provisions.

Brokerage JM Financial has upgraded the stance to Buy from the earlier Add. It has raised price target by 16.7% to Rs 140 from the earlier Rs 120.

"Q2FY27 was a strong earning quarter with robust fee momentum, NIM expansion, lower credit cost, loan growth of 16% and mix seeing a favourable shift. We are raising FY27E/28E EPS by 17%/19%, reflecting improved outlook. We are upgrading the stock to BUY with a revised TP of INR 140 (earlier INR 120), valuing the core bank at 0.9x FY28E BVPS," said the brokerage.

PNB  Q2 earnings

On Friday, PNB reported a 145% rise in net profit for the quarter ended September 2024. Net profit climbed to Rs 4303.5 crore in Q2 against Rs 1756 crore in the September 2023 quarter.  Gross NPAs in Q2 fell to 4.48% from 4.98% in the June 2024 quarter. Net NPAs slipped to 0.46% from 0.60% in the June 2024 quarter.

The lender's net interest income (NII) grew 5.99 percent to Rs 10,517 crore during the July-September quarter against NII of Rs 9923 crore in the corresponding quarter last year. Net interest margin (NIM), a key profitability metric, stood at 2.92 percent in the last quarter.