PNB Vs IndusInd Bank: Dividends, Bonus, Splits; Which Banking Stock To Buy After Diwali?

Analysts at JM Financial has announced their recommendation for both Punjab National Bank and IndusInd Bank shares. PNB is among leading PSU lender, while IndusInd is among the top private sector banks. However, PNB is a large-cap, while IndusInd Bank is a midcap stock.

Here's what analysts at JM said:

Punjab National Bank (PNB) Share Price

PNB delivered a strong quarter with PAT rising +14%/+193% YoY/QoQ (+8% vs. JMFe), driven by robust operating efficiencies with opex down ~13% QoQ and lower-than-expected credit costs at 23bps (vs. 34bps JMFe). NII declined 1% QoQ, as NIM (calc.) compressed 9bps QoQ to ~2.4%. Management expects a cumulative NIM improvement of ~15bps in 2H, led by TD re-pricing benefits. Asset quality strengthened with GNPA/NNPA at 3.45%/0.36% (-33bps/-2bps QoQ) and net slippages (calc.) at -0.27% (vs. 0.08% in 1Q), aided by INR 12bn of one account up-gradation to standard, with full provision write-back expected in 3Q/4Q. Management retained their guidance for GNPA

They added, "We have increased our earnings by ~15%-25% for FY26-28E on the back of improving operating leverage and lower credit cost. However, we build average ROA/ROE of 0.8%/12% for FY26-28E. Based on our new rating system, we upgrade stock to ADD (from HOLD earlier) with revised target price of INR 125 (vs. INR 105), valuing it at 0.9x FY27E Adj. BVPS."

IndusInd Bank Share Price:

IIB reported net loss of INR 4.4bn due to - i) ~9%/6% YoY decline in loans/deposits to drive consolidation in balance sheet, resulting in subdued margins/operating performance, and ii) higher than expected credit cost of ~3.2% (vs 1.9% of JMFe) due to pain in MFI portfolio. NIM (reported) contraction of 14bps QoQ (vs. 10bps JMFe) and subdued treasury income impacted overall operating profitability (-21% lower than JMFe). Furthermore, elevated stress in MFI portfolio drove credit cost higher at 3.2%, up 113bps QoQ. The management highlighted its continued focus on improving risk management/underwriting process, and formalizing leadership structure by on-boarding new leaders to enhance strategic depth.

The analysts said, "We believe these changes will keep pressure on growth/RoE in the near to medium term before it starts reflecting positively. We have cut our earnings by ~18%-70% for FY26-27E to factor consolidation in balance sheet. We expect loan CAGR of ~5% during FY25-28E and average RoA/RoE ~0.7/6% over FY26E-28E. Hence, we downgrade stock to Reduce (as per our rating system) with a revised TP of INR 775, valuing bank at 0.9x FY27E BVPS."

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