PNB Joins 1-Lakh-Crore Market Value Club as 3rd State-Run Lender

Punjab National Bank (PNB) has become the third Indian lender to cross the ₹1-lakh-crore market value, following a surge of over 60% in its shares this year. At its peak, the stock reached ₹91.81, hitting its market cap over the ₹1.01 lakh crore mark. This milestone had previously been achieved by the State Bank of India and Bank of Baroda.

Driving Factors Behind PNB's Soaring Stock

PNB's stock witnessed a boost due to a sustained rally in various public sector firms. Analysts emphasize that public sector banks are currently undervalued when compared to their private counterparts. The financial health of these banks has improved, evident in strengthened balance sheets, enhanced asset quality, lower slippage ratios, and reduced credit costs. For the July–September quarter of the current fiscal year, PNB reported a 327% rise in net profit, amounting to ₹1,756 crore. Gross non-performing assets (GNPA) decreased from 10.48% to 6.96%, while the net non-performing assets (NNPA) dropped from 3.80% to 1.47%.

Key Financial Metrics and Future Outlook

PNB's quarterly credit cost stands at 1.68%, showcasing an improvement. Management aims to further reduce it to 1.5-1.75% in FY24 through stricter underwriting on new loans and enhanced collection efficiency. The bank's improving growth and recoveries from older stressed assets contribute to better return metrics, fostering lower credit costs for new lending. Analysts predict that these positive factors will sustain earnings momentum. Public sector banks have outperformed, demonstrating a 50% Compound Annual Growth Rate (CAGR) in the last three years. Despite this rally in stock prices, some PSU banks still trade at low Price/Earnings (P/E) ratios of 5 to 6.

Stock Performance

In the last month, Punjab National Bank (PNB) has witnessed a surge in its stock price, with a 14% increase, including today's returns. This short-term performance reflects positive sentiment and a favorable market response. Expanding our analysis to a six-month time frame reveals even more impressive results, with the stock delivering a 79% return to its investors.

Zooming out to a one-year perspective, PNB continues to demonstrate robust performance, providing a commendable 51% return. This signifies sustained positive momentum and a favorable outlook for the bank over a more extended period. Despite a recent surge, Punjab National Bank's stock has yielded a modest 18% return, signaling a nuanced and evolving trend over the longer term.

Final Words

Punjab National Bank's robust performance and growth initiatives position it as a key player in India's banking sector. The recent milestone of achieving a ₹1-lakh-crore market value reflects market recognition of the bank's resilience and positive trajectory.