Punjab National Bank
All about company
1. The second largest public sector bank (PSB), PNB has seen its
advances (loan portfolio) grow by an average 25 per cent in the last
four years.
2. PNB is well positioned to capitalise on its dominant presence in
the growing Indo-gangetic region and maintain its superior margins.
Focus on technology and a wide branch network would ensure
efficiency in operations and robust business volumes.
3. PNB has been prudent in terms of lending to certain sectors. It has
slowed lending to retail (grew by only 15 per cent in Q3), which has
led to its share in the overall loan book fall from 23 per cent in
FY08 to 19 per cent now. However, going forward, PNB would be
focusing on educational and home.
Finance Sector
Important note - Still Indian Markets are directionless and indecisive due to which any further market correction may bring some more pressure on all researched stocks mentioned in following subsections.
The market volatility situation is for short term duration and in long term the markets will recover as Indian companies are having good fundamentals and good growth prospects.
Taking into consideration current market situation it is advisable to buy stocks in steps rather than buying in bulk in single trade.
(Researched date - Feb 2009)
It’s Growth
1. Deposits have grown at a healthy pace of 17 per cent (average) during FY05-FY08. With increasing risk aversion and the tide
turning in favour of safer havens, deposit growth of Public Sector Bank (29 per cent) have outpaced those of private banks (16
per cent) in Q3. For PNB, its deposit base, too, grew fast beating past averages.
2. The higher interest rate scenario also meant that depositors preferred term deposits over low-yielding deposits like savings
account, CASA (current account and savings account). Not surprisingly, term deposits have grown impressively at 43 per
cent outpacing lower-cost deposits (grew by 12 per cent). This trend has seen the share of PNB’s CASA deposits gradually
falling to 37.4 per cent in Q3 from 43 per cent in Q3 FY08. However, at 37-38 per cent levels, it is the highest among PSBs.
3. Even as the share of low cost deposits has fallen, the overall net interest margins (NIM) of PNB have been on the rise in the
last few quarters. While the cut in CRR and SLR ratios have provided some cushion, advances to high yield customers (and
better pricing power) are responsible for the robust margins. The bank’s strategy to mobilize bulk deposits (around 36% of
term deposits are bulk deposits), allows PNB to re-price these deposits much faster, thus would cushion margins in a
declining interest rate scenario.
Expected Returns
CMP - Rs.362
Buying Price - The stock has support at Rs.330, buy near or below Rs.330 is recommended. The support of 330 level is
broken and currently the stock is trading at 292 level (updated - 06 Mar 2009)
(It went down till Rs.286)
Returns Expected - above Rs.450
Period - 1 to 2 years
Taking into consideration Rs.286 as buying price following are the returns
153% Target acheived in month of 19 May 2009. It went high till Rs.725 (Updated - May 2009)
4. PNB has a wide branch network of about 4,600 branches (second largest in
the country), which has enabled it to maintain higher CASA (current account
and savings account) deposits.
Importantly, all its branches and extension counters are fully automated and
networked. The technology processes are in place to take care of 50,000
villages, 100,000 terminals and 150 million customers, and future demand.
The growing usage of technology has improved productivity over the
years
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