On Monday, the Punjab National Bank (PNB) saw a significant surge in its share price, which gained over 7% in morning trades following the announcement of its impressive Q1 results. The share price opened at ₹124.86, marking a 4% increase from the previous close of ₹119.95 on the NSE. It continued its upward trajectory, reaching an intraday high of ₹128.66, representing gains of more than 6%.

Record-Breaking Q1 Results

Punjab National Bank reported its highest-ever quarterly standalone profit of ₹3,252 crore for the first quarter of the current fiscal year. This impressive profit surge was attributed to a significant increase in interest revenue and a reduction in bad loans. The net profit witnessed a remarkable year-on-year growth of 159%.

The bank’s net interest income (NII), the difference between interest earned and paid, rose by 10.2% to ₹10,476.2 crore in Q1FY25, compared to ₹9,504.3 crore in the same period last year. This increase in NII underscores the bank's strong performance in managing its core revenue-generating activities.

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Analyst Perspectives

Jefferies India Pvt Ltd has set a target price of ₹150 for PNB shares, indicating an approximate 20% upside from current levels. Their report highlights that Q1FY25's asset quality remained robust, although the net profit was slightly below their estimates due to higher operating expenses related to Priority Sector Lending Certificates (PSLCs). Despite this, Jefferies anticipates a rebound in earnings and views the current valuation of PNB shares as reasonable, projecting a Return on Assets (ROA) of 0.9% by FY26.

Motilal Oswal Financial Services (MOFSL) has also revised their earnings per share estimates upward by 5.6% and 0.8% for FY25 and FY26, respectively. This adjustment reflects expectations of lower provisions, a healthy net interest income, and steady margins. MOFSL estimates an ROA of 1.0% and an ROE of 14.5% in FY26, with a revised target price of ₹135 for PNB shares.

Kotak Institutional Equities provided a more cautious view. While they acknowledged the bank’s comfortable asset quality with a net non-performing loan (NPL) ratio of 0.6% and a slippage ratio of 0.8%, they raised concerns about the valuation of PNB shares. Despite the positive growth in advances (up 12% year-on-year, led by retail and agriculture sectors), Kotak's target price for PNB shares stands at ₹110, reflecting their view on current share price levels being expensive.

Conclusion

The strong performance of Punjab National Bank in Q1FY25 has been well received by the market, driving a significant rise in its share price. Analysts have provided a range of target prices, reflecting varied perspectives on the bank's future performance and valuation. As PNB continues to demonstrate robust financial health and operational efficiency, its shares remain a point of interest for investors and analysts alike.

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