Maintain 'buy' on Punjab National Bank - TP Rs.1050 - Geojit BNP Paribas Financial Services

- 3QFY13 PAT at Rs.1310 crore increased 13.5% yoy and 22.5%qoq and it was significantly higher due to lower than expected provisions of Rs.800 crore against market expectation of Rs.1250 crore.

- Lower than expected provision is due to the bank's ability to control incremental NPL addition due to higher upgrades and recoveries.

- Revised earnings by 15% for FY13 and TP have been hiked 5% tom Rs.1050 from Rs.1006.

- Slippages of Rs.2900 crore has been in line with market expectation of Rs.3000 -3500 crore.

- Management guidance is better than previous quarters. Asset quality trends are expected to stabilize and improve.

- Restructured assets added during the quarter at Rs.3700 crore are on the higher side as it includes Suzlon. It is likely to be moderated.

- Continue to prefer Punjab National Bank as its risks- returns remain attractive.

- Core operations remain in line with NII at INR3730 crore, core operating profit growth of 5.5% q-q, and CASA increased 118bps q-q as term deposits declined due to reductions in wholesale deposits.

- PNB is preferred to other PSU banks as it has inherently robust earnings driver from higher margins.We continue to prefer PNB to other PSU banks we cover to play the turnaround potential, as we see an inherently robust earnings driver from higher margins.

- Management's guidance on ability to manage asset quality pressure seemed much improved and positive.

Source : Equity Bulls

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