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Emkay Global
PNB (Sell)
Target: ₹29
CMP: ₹39.05
Punjab National Bank has posted a higher-than-expected PAT of ₹510 crore (vs estimated loss of ₹440 crore), led by lower opex and contained provisions. Cumulative Covid-19-related provisions (including for proforma slippages/restructuring) has improved to ₹3,000 crore (46 bps of loans).
Proforma GNPA stood high at 14.7 per cent in Q3, while the restructuring book was at ₹12,000 crore (1.8 per cent of loans) with some more in the pipeline. Overall collection efficiency remains sub-par at 87-88 per cent as of December 2020, but management expects it to improve to approximately 94 per cent by March 21.
Overall credit growth remains sub-par due to merger overhang and continued risk averseness.
The bank could raise capital to the tune of ₹3,800 crore (CET 1 now at 10.1 per cent) vs. planned QIP of ₹7,000 crore due to sub-par demand and thus, PNB plans to raise supplementary capital of ₹2,500 crore with Tier I bonds.
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