Punjab National Bank stock gained 53% in CY23; should you buy?
Punjab National Bank has seen its shares perform exceptionally well this year so far, rewarding its shareholders with a return of 53%. During this period, the stock has appreciated from ₹56.80 apiece to the current level of ₹86.40. This marks the stock's third consecutive yearly return.
In CY21, it gained 12.86%, and in the following year, it rallied another 51.34%. Currently, the stock is ranked as the top gainer in the Nifty Bank index, with a yearly return of 55.4%. Also Read: Nifty Bank hits new record high as market surges sharply; ICICI Bank top gainer Despite this stellar performance, domestic brokerage firm Sharekhan believes the stock still has room for further growth.
According to brokerage, the bank's return ratios have remained subdued compared to peers due to elevated provisions and high operational costs but are likely to improve from hereon. The improvement in asset quality and a strong outlook are likely to help in the faster normalisation of credit costs, thereby improving the visibility for improvement in return ratios, it noted. The bank aims for NNPL <1% and plans to run down most of the restructured book by the end of FY24E.
Furthermore, a decrease in retirement-related provisions is expected to enhance cost ratios. PNB targets 12–14% loan growth going forward, and its CET-1 ratio, excluding H1FY24 profits, remains comfortable at 0.2%. Recently, an increase in the risk weights in unsecured loans and loans to NBFCs would have a 30–40 bps impact on the capital buffer.
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