PNB: Punjab National Bank

Punjab National Bank (PNB) is currently witnessing a credit growth of ~27-28% (CD ratio of ~75%); this is much ahead of the industry estimates. For the full year FY11, the bank expects to clock credit growth of 24-25%, which is again much ahead of industry.Insurance vertcle of the bank is also seeing a pick up. Margins not to breach 3.5%: PNB reported margins of 4.1% in Q2FY11 and 4.0% for H1FY11. While the management believes that these levels of margins are unsustainable, the bank should close the year with a margin of ~3.6% for the full year. Moreover, the management is confident of maintaining 3.5% margins (historically has been around these levels), going forward. Asset quality to remain stable: Asset quality of the bank is likely to remain stable and the management does not expect any significant slippages. Meanwhile, the credit costs are likely to remain stable at the current levels. Investors are recommended to accumulate the stock for a target of Rs1475..