Target: ₹130
CMP: ₹116.90
Punjab National Bank reported a 5 per cent PAT beat at ₹4,900 crore/1.1 per cent RoA in Q2-FY26, supported by broadly in-line NII, higher other income, and lower staff costs, although partly offset by higher provisions.
As expected, the bank’s shift to the new tax regime, which reduced the effective tax rate to about 25 per cent from about 35 per cent earlier, helped the RoA rebound to above 1 per cent. Credit growth moderated to around 11 per cent y-o-y in Q2FY26; the bank, however, expects growth at around 11-12 per cent in FY26.
NIM contraction was limited at 10 bps q-oq to 2.6 per cent; the bank expects NIM to improve by 5 bps in Q3 and by 10 bps in Q4, supported by deposit repricing and CRR-related benefits. Contained slippages along with one lumpy upgradation led to a sharp 33bps QoQ improvement in GNPA ratio to 3.5 per cent.
Further, the management expects 75-80bps net impact on CRAR due to the recent ECL guidelines, which have been mainly drafted on account of higher provisions in Stage 2 assets. We broadly maintain our estimates; Factoring in the reasonable RoA/RoE of about 0.9-1 per cent/14 per cent and cheap valuations at 0.8x Sep-27E ABV, we retain Buy on PNB and TP at ₹130.