On Tuesday, Jefferies adjusted its outlook on Punjab National Bank (PNB:IN), reducing the price target to INR135 from INR150. This revision comes despite the firm's continued endorsement of the stock with a Buy rating. The adjustment was made in light of Punjab National Bank’s second-quarter financial performance for the fiscal year 2025.
PNB reported a profit of INR43 billion, a significant increase of 145% compared to the same period the previous year. This growth exceeded analysts' expectations, bolstered by a combination of higher other income and reduced credit costs, which helped to balance out an increase in staff expenses due to Accounting Standard 15 (AS-15). A notable highlight for the bank was the reduction in slippages to 1% and the achievement of satisfactory recoveries.
The analyst from Jefferies cited the bank’s 90% coverage ratio as a positive indicator, suggesting that credit costs are likely to remain low for the next one to two years. Looking ahead, the analyst projects a Return on Assets (ROA) of 0.9% for the fiscal year 2026, with the potential for an improved ROA if the tax rate decreases.
The valuation of Punjab National Bank at 1 times its adjusted price to book value (PB) for the fiscal year 2025 estimates is considered attractive by Jefferies. The firm's endorsement of the stock as a Buy, along with the revised price target of INR135, reflects confidence in the bank's financial prospects and the potential for investor returns.
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