Nirmal Bang Institutional Equities has upgraded Punjab National Bank (PNB) to a 'Buy' rating, citing strong quarterly performance and improved profit margins. The brokerage expects the bank to maintain steady profitability through the 2027 financial year. With a new price target of Rs 137, analysts believe the stock remains reasonably valued compared to the bank's assets.
Nirmal Bang Institutional Equities has upgraded its rating for Punjab National Bank (PNB) to 'Buy', raising the target price to Rs 137 per share. This shift from a previous 'Hold' position follows a review of the bank's second-quarter performance, which the brokerage noted as robust, supported by consistent growth in its loan book.
The brokerage has also increased its profit estimates for the bank for the 2027 and 2028 financial years by 5-8%. The primary reason for this outlook is an expected improvement in net interest margins—the difference between the interest a bank earns on loans and the interest it pays to depositors. PNB is strategically shifting its focus toward higher-yield loans, which is expected to support profit levels even if other income sources, like treasury gains, remain moderate.
A central focus of the brokerage report is the bank's ability to maintain a 1% Return on Assets (ROA) through the 2027 financial year. For investors, ROA is a useful metric to understand how efficiently a bank uses its resources to generate profit. Having recorded a 1.05% performance in the first half of the current year, the bank is being monitored for its ability to sustain this efficiency.
From a valuation perspective, the report notes that the stock is trading at approximately 0.73 times its expected forward book value. In the banking sector, this ratio helps investors understand if the stock price is inexpensive relative to the net value of the bank's assets. The brokerage finds this current valuation attractive.
While the outlook is positive, investors should remain aware of broader industry trends regarding credit costs. The brokerage anticipates that the bank is entering a phase where the benefit of past write-backs—where the bank recovered money on previously written-off loans—will likely decrease. As a result, the bank will move toward long-term averages for credit costs. Future quarterly results will be important for investors to track to see how well the bank manages its operational expenses and credit quality during this transition phase.