Value For Money - Punjab National Bank

We had recommended Punjab National Bank (PNB) to our investors in our Issue No 6 dated March 15, 2009 in the ‘Cover Story’ at Rs 341.45. Post our recommendation the counter went up to Rs 467, thus providing an upward return of 36.76 per cent. Currently, the scrip is trading at Rs 451.85 which is 32.33 per cent above our recommended price. In the past four quarters, PNB’s loan book has grown by 40 per cent implying a CQGR (compounded quarterly growth rate ) of 8.7 per cent. In nine months ended FY09, the advances grew by 18.5 per cent YTD indicating an annualised growth of 25 per cent YoY.

The key drivers behind the loan growth included the movement of large corporate borrowers to public sector banks, extensive branch network, established rural presence, higher credit demand and an existing customer base. The bank has entered into an alliance with Networth Stock Broking, SMC Global Securities and SAM Global Securities. For nine months ended FY09, its total revenues grew by 36 per cent to Rs 16,147 crore over the same period last year. A total of 51 per cent came from the retail banking segment, whereas 24 per cent was contributed by the treasury business and 20 per cent by the corporate and wholesale banking business. The net earning during the period was Rs 4,598 crore, which is a 47 per cent increase from the previous year. The banking index has given a return of 30.7 per cent from the time we recommend the scrip till date and in comparison the PNB has proved to be a superb performer. During the same period, the benchmark index gave a return of 25 per cent. Looking at the return outcome, our advice to investors is to book a partial profit on this counter at its current levels.