Punjab National Bank

HDFC Securities has recommended buy rating on Punjab National Bank with a target of Rs 1148 in its July 28, 2010 research report

The bank has reported decent numbers in Q1FY11 amongst the other public sector banks. The asset quality of the bank though came
down in Q1FY11 is still at healthy levels with Net NPA% at 0.66% of the net advances. This is still one of the healthiest asset qualities
in the industry. PNB managed to grow its Net Interest Margin in Q4FY10 to 3.94%. This is one of the highest in the industry.
HDFC Securities has recommended buy rating on Punjab National Bank with a target of Rs 1148 in its July 28, 2010 research report

PNB offers one of the best investment profiles due to its strong liability franchise, good earnings visibility, healthy asset quality, strong
CASA ratio, adequate provisioning and reasonably healthy CAR. PNB could also benefit out of the rural thrust of the government as
three fifth of its branches are in the farm rich belt of Punjab, Haryana and Rajasthan. It also has a strong presence in the Indo Gangetic
plains, which helps the bank lend more to the MSME sector. Aggressive lending during the credit crunch period has resulted in increase in the restructured assets.

In our Q4FY10 result update on PNB dated May 11, 2010, we had mentioned that the stock could in the Rs.899 (1.45x FY11 (E) Adj.
BV) to Rs.1054 (1.70x FY11(E) Adj. BV) band over the next quarter. Post the report; the stock achieved a high of Rs 1103.75 on 5th
July 2010 and a low of Rs 933.10 on 26th May 2010.

We are keeping our FY11 estimates unchanged at the moment, though there is a good chance that the bank could report higher net
interest income and net profit than our estimates. We feel that the bank, which is currently trading at 1.67x FY11E Adj. BV, could trade
in the range of Rs 960 (1.55x FY11E Adj. BV) and Rs 1148 (1.85x FY11E Adj. BV) over the next quarter.