Punjab National Bank (PNB) witnessed a significant rise in its share price on Monday, July 29, with a 7% surge during the trading session. This upward movement comes after the bank’s management lowered the financial year 2025 credit cost guidance to 50 basis points from the previous 100 basis points. This optimistic outlook has led to heightened investor confidence in PNB’s future performance.
Strong Q1 Performance
PNB’s share price increase follows a robust set of first-quarter financial results. The bank reported a 159% year-on-year rise in profit, driven by a sharp fall in provisions and healthy recoveries. Net interest income (NII) also saw a 10% year-on-year growth, reaching ₹10,476 crore. This growth was aligned with estimates, largely attributed to the average balance sheet growth, though margins saw a slight decrease of 3 basis points quarter-over-quarter, settling at 3.07%.
Improved Asset Quality and Lower Provisions
One of the key factors influencing the PNB share price is the improvement in the bank’s asset quality. The gross non-performing assets (NPAs) ratio significantly dropped, prompting the bank to revise its FY25 gross NPA guidance to 4%, down from the previous 5%. This reduction in NPAs, along with lower slippage and credit costs, has positively impacted investor sentiment.
Despite the decline in recovery from written-off accounts on a sequential basis, the adjusted net credit cost was maintained at just 2 basis points, compared to negligible in the previous quarter. However, Morgan Stanley highlighted the need to monitor the elevated levels of special mention account (SMA) 1 and 2 at 2.5%.
Market Reaction and Analyst Insights
The positive developments have led to a surge in the PNB share price, which settled at ₹119.84 on the NSE, reflecting a 1.80% increase as of July 26. Year-to-date, the stock has risen by approximately 23%. Despite the upward momentum, global brokerage firm Morgan Stanley has assigned an ‘Underweight’ rating to PNB, albeit raising the target price to ₹80 per share, implying a potential downside of 33% from the last closing levels.
In summary, PNB’s improved financial performance and optimistic future guidance have driven the recent surge in its share price. The bank’s strategic efforts to lower NPAs and credit costs have strengthened investor confidence, contributing to its upward trajectory in the stock market.
