Global Research and brokerage firm CLSA is bullish on the shares of Punjab National Bank, after the state-run lender reported a reduction in stresses assets to 15% from 18% a year ago, even as the net profit showed a marginal 2% rise. Notably, the shares have risen by more than 40% since Narendra Modi-led government announced a mega PSU bank recapitalisation plan worth Rs 2.11 lakh crore. Punjab National Bank has been able to bring down fresh slippages meaningfully to Rs 8,449 crore in the September quarter from as high as Rs 11,245 crore a year back. CLSA says that stable NPAs and strong CASA growth is a key driver in case of Punjab National Bank. Percentage of gross NPAs stood at 13.31% as of September 30, 2017 over 13.66% as of June 30, 2017. Percentage of net NPAs also declined to 8.44% over 8.67% during the same period.
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CLSA noted that the key positives in the quarter ended September 30th 2017 was the moderation in slippages to 4.6% of the past-year loans. CLSA observed that the CASA franchise is strong, and has retained the earnings estimates. Notably, CLSA has increased the target price to Rs 250, from Rs 180 earlier. The shares were trading at Rs 205 on NSE this morning, down by more than 1.3% since the previous close.
Notably, the shares have returned more than 80% in the year so far, as compared to BSE Sensex returns returns of 27% in the same period. The BSE Bankex has returned 40% in the year so far. CLSA’s target price implies an upside of 22% from the current market prices. In the last one-month alone the shares have risen by more than 60%.