Punjab National Bank (PNB) shares are in the spotlight following a strong Q3FY25 performance, with Jefferies maintaining a Buy rating, while Morgan Stanley (MS) remains cautious with an Underweight stance. The stock is currently trading at ₹101.50, with Jefferies projecting an 18% upside and MS forecasting a 6% downside.
Jefferies has reaffirmed its Buy rating with a target price of ₹120, suggesting an 18% upside from current levels. The brokerage highlighted that PNB’s Q3FY25 profit surged to ₹45 billion, marking a 103% year-on-year increase. While core earnings were in line with expectations, non-core gains, such as tax refunds and provision write-backs, provided a significant boost to overall profits.
Jefferies also pointed to healthy deposit and loan growth of 16% and 17%, respectively. The bank’s loan-to-deposit ratio (LDR) stands at 70%, which is relatively low, indicating potential for faster loan growth compared to deposits in the coming quarters. Moreover, asset quality has remained strong, with a coverage ratio of 90%, reflecting robust risk management. Jefferies believes that the shift to new tax norms could further enhance the bank’s return on assets (ROA) starting from FY27, contributing to sustained profitability.
In contrast, Morgan Stanley (MS) maintains an Underweight rating on PNB with a target price of ₹95, implying a 6% downside from current levels. MS noted that credit costs (post non-performing loan recoveries from written-off accounts) were -35 basis points, compared to -43 basis points in the previous quarter. This helped PNB achieve a ROA of 1%. However, MS expressed concerns over core margin moderation, indicating that the bank’s profitability could face pressure in the coming quarters.
MS also suggested that PNB’s earnings may have peaked and are likely to normalize over the next few years. Despite the strong Q3 results, MS remains cautious about the bank’s ability to sustain this level of performance, particularly given the challenges in maintaining margins and the expected normalization in credit costs.
With Jefferies optimistic about PNB’s growth potential and MS highlighting potential headwinds, the stock’s future trajectory will largely depend on how well the bank can balance loan growth, manage asset quality, and sustain margins in a dynamic economic environment.
(Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investors should consult their financial advisors before making any investment decisions.)
