Fundamental Analysis of Punjab National Bank (PNB)

Summary

Introduction
Punjab National Bank, popularly known as PNB Bank, became the third bank in the public domain to reach a market valuation of Rs. 1 lakh crore on 15 December 2023. While the PNB share price was not at an all-time high on Friday, the government’s equity aid to revive the public sector banks from the claws of NPAs helped the bank achieve this milestone.

However, is it just the government’s support, or is the bank also putting effort into becoming one of the largest public sector banks in the country? Let’s find out.

Overview of Punjab National Bank

In 1894, members from different parts of the country established the Punjab National Bank with a vision of offering the citizens a true national bank that would benefit the people and the economy. The first board members included some eminent personnel such as Sardar Dayal Singh Majithia, Kali Prosanna Roy, Lala Harikrishna Lal, and others.

Business Overview: PNB is a full-service bank offers various financial products like  loans to insurance to deposits, government financial schemes, loans for retail, business, and agricultural needs. It has multiple schemes for MSMEs and SMEs. Apart from personal banking, corporate banking services are available, including cash management services, forex services for exporters and importers, and more. It also offers international banking facilities from foreign exchange and NRI accounts to world travel cards and others. it also offers capital services segment, which offers Mutual Funds, Merchant banking facilities, Depository services, and more.

Key Management Personnel

• Shri Atul Kumar Goel (CEO and MD) of Punjab National Bank appointed on 1 February 2022. He has a rich professional banking experience of more than 30 years. His expertise revolves around more or less all the banking segments, including handling large corporates, risk management, treasury management, financial planning, and investor relations.
• Atul Kumar Goel played a pivotal role in bringing UCO Bank to life when it was on the verge of sinking with five years of consecutive losses. In FY 2020-21, when he was the MD and CEO of UCO bank, he brought the profitability back to the bank. He also held the position of Director of New India Assurance Co. Ltd. There are several similar positions he either held in the past or still holds.
• Shri K G Ananthakrishnan acts as the Non-official Director and Non-Executive.
• Shri Kalyan Kumar, an Executive Director of Punjab National Bank, started this journey in October 2021. He has 25 yrs+ experience in the banking sector, and he started as a Rural Development Officer at Union Bank in 1995. He is known for his strategies for different training programs for public sector banks, unique leadership development, and employ-centric operations.

PNB Shareholding 

Share Holding Charts

Promoters holding over the period.

Mutual Funds holding over the period.

Foreign institutionals holding over the period.

Key Ratios

Financials

Margins

Performance

Valuation

Growth

Efficiency

Stability

• Net NPA: Bank has reduced its NPA over the years. Net NPA Ratio in FY21, it stood at 5.73% while it decreased to 2.72% in FY23.

PNB Share Price History

The Punjab National Bank share price has surged close to 66% in the past year, between 16 January 2023 and 16 January 2024. With mior corrections in between the share price went up gradually in last year.

Competitive Advantage

• 3rd largest bank in the public sector as per market valuation.
• Offering basic banking products as well as high-end fintech services
• Net NPAs reduced to 2.72% in FY23, which suggests improvement in the financial health of the bank
• Strong and experienced management team
• PNB has a well-developed deposit base which increased by 14.18% on a YoY basis in Q1FY24..

Risks

While PNB’s share price is reviving, the profits are going up, but still, some challenges remain which can be a barrier to the growth of this PSU bank.

• In macro-economic situation, like recession fear in the West, there is a potential for a ripple effect on  can lead to borrower’s credit servicing ability.

Overview

The bank's strong recovery, driven by a reduction in credit costs due to lower slippages and decreasing non-performing assets(NPA), has contributed to an improved core return on assets (RoA). This positive trend suggests a potential for strong performance in the near-to-mid term, showcasing the institution's enhanced financial health and efficiency in asset utilization. This improvement in RoA is a  positive indicator. Considering a target price progression of Rs115, 2nd target is Rs.129 and Rs.153 with a stop loss of Rs.91