Punjab National Bank (PNB) shares surged over 3 percent Friday after posting a 123 percent spike in net profit. The state-owned lender reported a net profit of Rs 1,126 crore for the quarter ended December 2021, as against Rs 506 crore reported in the corresponding quarter of the previous fiscal.
Morgan Stanley has an equal-weight rating on PNB shares at a target price of Rs 53, up over 30 percent from its current market price. It said profit before tax is 5 percent below its estimates due to higher-than-expected credit costs. An equal weight rating the stock will perform in line with the benchmarks.
The brokerage said its pre-provision operating profit (PPoP) did well and is 34 percent above its estimates due to improvement in margin and lower costs. PPoP is the amount of income a bank earns in a given time period, before considering the funds set aside to provide for future bad debts.
Its slippages moderated for the quarter under consideration, Morgan Stanley added. Slippages are when a standard asset becomes a non-performing asset (NPA). The lender saw a slight improvement by cutting its gross non-performing assets (NPAs) as a percentage of gross advances to 12.88 percent from 12.99 percent year-on-year.
The lender said the banking situation continues to be uncertain due to the discovery of new variants of coronavirus. "The major identified challenges for the bank would arise from eroding cash flows and extended working capital cycles. The bank is gearing itself on all the fronts to meet these challenges," it said in an exchange release.
At the last count, PNB shares were flat at Rs 41. In comparison, the Nifty PSU Bank index was down over 0.3 percent.
(Edited by : Ajay Vaishnav)
