Brokerage house Prabhudas Lilladher is bullish on Punjab National Bank (PNB) and has recommended 'Accumulate' rating on the stock with a target price of Rs 1025 in its research report dated October 22, 2014.
"PNB's Q2FY15 performance disappointed on higher incremental slippages, subdued NII growth and higher provisions resulting in a PAT of Rs.5.7 bn, much lower than our as well as the consensus estimates. Asset quality issues have resurfaced on large slippages during the quarter. The restructuring portfolio remains the highest in the industry at 11% of loans where NPA fallouts have started to increase (35% of fresh slippages). We remain concerned as 35-40%of book will be moving out of moratorium in next 12-15months and non performance can put pressure on asset quality, but management assures of tight monitoring. Maintain Accumulate with PT of Rs 1025."
"PNB provided Rs6.8bn of additional provisions for specific loan a/c. Management has adopted policy to use write-back of investment depreciation and recovery from written off a/c for making provision specific loan a/c, which is prudent but is quite late in realising the need of prudent provisions. Despite prudent provisioning, PCR remains at 44% (calculated) and has not made material impact as stress remains high", says Prabhudas Lilladher research report.
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