Punjab National Bank shares fall post Q1 results, brokerages divided; Religare quotes target price at Rs 70

Brokerage are divided on Punjab National Bank shares after the public sector bank reported 57.49 per cent fall in net profit at Rs 306.36 crore for the quarter ended June 30, 2016 against Rs 720.71 crore in the corresponding quarter a year ago.

Religare Institutional Equities in a research report said, “We continue to believe that mounting provisions and sustained pressure on asset quality and margins will keep earnings soft. We maintain ‘Sell’ on Punjab National Bank shares with a March 2017 target price of Rs 70.

At 10.57 am, shares of the bank were trading 1.67 per cent down at Rs 126.85. The scrip opened at Rs 128.80 and has touched a high and low of Rs 129.35 and Rs 126.15.

KR Choksey Shares and Securities in a research note said, “Punjab National Bank observed turnaround in net profit during the first quarter of this fiscal primarily on the back of lower than expected provisions, better recoveries and costs benefits. While seasonally weak June quarter witnessed sluggish loan traction, the gross NPA headline number looked higher. Going forward, with expected better recoveries and credit growth expected to turn double digit by fiscal year end, the headline NPA number should also witness a decline.” The brokerage house is bullish on PNB shares and believes can touch Rs 165 in the next few quarters.

The bank reported net loss of Rs 5,367.14 crore in the sequential quarter ended March 31, 2016.

However, total income of the bank jumped by 3.71 per cent year-on-year to Rs 13,930 crore. Bottom line of Punjab National Bank slid after it reported 10 per cent year-on-year fall in net interest income to Rs 3699 crore in the quarter under review against Rs 4102.47 crore in the corresponding quarter a year ago.

Rise in provision and contingencies and high operating expenses further put pressure on the net profit of Punjab National Bank. During April-June period, provision and contingencies of the bank increased by 51.18 per cent to Rs 2,738.38 crore against Rs 1,811.39 crore in the same quarter last year. Operating expenses climbed by 17.39 per cent year-on-year to Rs 2779.44 crore.

While absolute gross non-performing assets (NPA) and Net NPAs remained largely stable, However, Punjab National Bank’s Gross NPA and Net NPA ratio jumped to 13.75 per cent and 9.16 per cent from 12.90 per cent 8.61 per cent in the sequential quarter ended March 31, 2016 due to a reduction in loan book.