Punjab National Bank (Buy) - Avendus

We cut the FY14f-FY16f PAT forecast by up to c8% to factor higher provisions, investment depreciation and lower NIM. We increase our estimate for provisions due to investment depreciation in FY14f by 19-bp to 0.30% of the G-sec, a 20-bp rise y-o-y. We lower our FY14f NIM estimate by 8-bp to 3.19%, implying a 7-bp contraction y-o-y, driven by higher cost of deposits. We raise the incremental NPL assumption for FY14f-FY16f by up to 30-bp. The stock has underperformed the Sensex and CNXPSBK by c41% and c11%, respectively, in the last three months. We rollover the TP to Sep14 and lower it to INR927. The TP values the stock at a one-year forward adjusted P/B of 0.89x. We maintain a Buy rating.

Source : Equity Bulls

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