retail, agri and industry sectors. As well, with the highest exposure to discoms among large PSUs, PNB has benefited more from the recent FRP implementation. In addition, PNB offers the most valuation comfort among the three PSUs in our coverage. While low provision coverage, high MTM (mark-to-market) outgo and pressure on NIMs would be dampeners, we expect this stock to be the best positioned for a re-rating once the asset quality trends start improving.
Valuation: Our target price implies 0.63x 1-year forward ABV of (adjusted book value) R994 and 0.93x on NNPL (net NPL) adjusted 1-year forward book of R670 for an adjusted RoE of 12.1% for FY14F. At current prices, PNB is trading at 0.56x 1-year forward ABV.