Mumbai, Punjab National Bank (PNB) has become the third state-run bank in India to achieve a market value exceeding Rs 1 lakh crore, following a robust surge of over 60% in its shares throughout the year. The stock reached a peak of Rs 91.81, propelling its market capitalization over the significant Rs 1.01 lakh crore mark. This accomplishment places PNB in the league of State Bank of India and Bank of Baroda, which had previously crossed this milestone.
Analysts highlight that public sector banks are currently undervalued when compared to their private counterparts. The rally in various public sector firms has contributed to the upward trajectory of PNB’s stock. The banking sector, particularly public sector banks, has demonstrated strengthened balance sheets and improved asset quality. Low slippage ratios and reduced credit costs in public sector banks have bolstered investor confidence.
PNB reported an impressive 327% rise in net profit, amounting to Rs 1,756 crore, for the July–September quarter of the current financial year. The bank showcased a decline in gross non-performing assets (GNPA) to 6.96% from 10.48%, and net non-performing assets (NNPA) fell to 1.47% from 3.80% during this period.
The bank’s quarterly credit cost stands at 1.68% (-46bps QoQ), and the management aims to further reduce it to 1.5-1.75% in FY24. Stricter underwriting on new loans and enhanced collection efficiency are expected to contribute to this objective. PNB’s improving growth, recoveries from older stressed assets, and lower credit costs for new lending are anticipated to sustain its earnings momentum.
Sharekhan, in a recent note, expressed optimism about PNB’s future growth, projecting strong PPoP growth, stable margins, and lower operating expense growth. The overall outlook for asset quality remains stable to positive, and improved return metrics are expected in FY25.
Sridhar Sivaram from Enam Holdings, in a recent interview, emphasized that despite recent gains, PSU stocks remain undervalued. PSU stocks have outperformed, showing a 50% CAGR in the last three years. Some PSU banks, although experiencing a quadrupling of stock prices, still trade at low P/E ratios of 5 to 6. Sivaram suggests that these stocks could double and still be reasonably priced.
The BSE PSU index has surged 43% this year, with a P/E ratio of 9.12. Enhanced governance and business models have alleviated government pressure for profit focus in PSU firms. Sivaram finds the entire PSU sector promising, except for a few, and worthy of attention.*
As of 9:56 am, PNB was trading at Rs 90.8 a share, indicating a 1% increase from its previous close.
