Punjab National Bank (PNB IN; Mkt Cap USD4b, CMP Rs537, Buy)
A strong come-back: NII grew 13% YoY v/s our estimate of 7% growth due to stronger asset growth and stable margins. Earnings grew 129% YoY v/s our estimate of 34% due to stronger NII and lower opex due to write-back of provisions made during 9MFY08 towards transitional AS-15 liability. PNB has charged off transitional liability on account of revised AS-15 of Rs9.3b (Rs30/share; ~9% of FY07 net worth) to its opening reserves.
n Gross NPAs declined to 2.7% and net NPAs to 0.6% in 4QFY08.
n Loans grew 24% YoY and 18% QoQ to Rs1.2t and deposits grew 19% to Rs1.7t (9% growth QoQ).
n CASA ratio was stable QoQ at 43%; however, it was lower YoY (46% in 4QFY07).
n NIMs remained stable QoQ at 3.66%, but were down 35bp YoY. NIMs for FY08 were 3.58% v/s 3.85% in FY07.
Maintain Buy: We are impressed by PNB’s 4QFY08 performance. We like PNB for its inherent strengths of large branch network in cash-rich Northern India, strong liability side of balance sheet and technological advancement. The stock trades at 1.1x FY10E BV and 5.7x FY10E EPS. We expect RoA to sustain at 1.2% over the next two years and RoE to remain ~21%.
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