75% Dividend Record Date On June 21, 5:1 Split: BUY PSU Bank Stock For Rs 130-140 Target, 9% Rise Seen

PSU lender, Punjab National Bank is set to turn ex-dividend next week for a payout of 75% for FY24. Accordingly, PNB stock will be in focus. YTD, the stock is up by 32%. Ahead of the dividend record date, brokerage Motilal Oswal is Neutral on the stock, while Sharekhan has recommended BUY with a target price of Rs 140.

This week, PNB share price ended at Rs 128.90 apiece with a market cap of Rs 1,41,931.99 crore. The stock's 52-week high and low is at Rs 142.90 apiece and Rs 49.70 apiece respectively.

PNB Dividend:

PNB has recommended a dividend of ₹1.50 per equity share (75%) for the year ending March 31, 2024 subject to requisite approvals. The record date to determine eligible shareholders for the dividend payout is fixed on June 21, 2024. Accordingly, the stock will also turn ex-dividend on June 21.

Since July 2003, PNB's share price has delivered up to 21 dividends.

Apart from dividend payout, PNB has also turned ex-split only once. On December 14, 2014, the stock turned ex-split for sub-division in the ratio of 1:5. The face value of Rs 10 was split to Rs 2 each.

BUY Punjab National Bank Share Price:

Brokerage Motilal Oswal met with the top management of Punjab National, represented by Atul Kumar Goel, MD & CEO, and Deepak Singh, Deputy General Manager, to discuss the bank's business outlook, profitability goals and other key focus areas.

Motilal highlighted that PNB's management is expecting credit growth of ~11- 12% in FY25. It will review growth guidance as and when visibility improves. Also, the management expects to grow its deposit base by 9-10% in FY25 while maintaining the CASA mix at 42%, and that of CAGR in NII is estimated at 9% over FY24-26.

Further, the brokerage estimates consistent moderation in the C/I ratio toward 50% by FY26. Also, discussions with tax consultants for transitioning toward the new tax regime are underway and the bank will take a call on this in the coming quarters. The rationalization of branches undertaken previously and prioritization of digital advancements are expected to bolster operational efficiencies, leading to a moderation in cost ratios and enhancing the bank's overall financial performance.

On the valuation, Motilal's note said, "PNB has been reporting a healthy performance, with earnings driven by steady revenue growth and controlled provisions. With a comfortable CD ratio, the bank is well-positioned to grow its loan book with a continued focus on high-yielding RAM segments. MCLR repricing and effective CD ratio management are expected to cushion margins against elevated funding costs. Asset quality continues to see a sharp improvement as recoveries and W-offs continue to be healthy. PCR has thus improved to 88% and we estimate the net NPA ratio to improve further."

Additionally, the brokerage said SMA overdue (with loans over INR50m) remains under control at 0.15% of domestic loans, while the bank continues to guide for robust recoveries at ~2x of slippages. PNB expects the credit cost and slippages to be contained at

With a strategic focus on strengthening its balance sheet and targeting a further reduction in the NNPA ratio to 0.5%, PNB is poised to sustain profitability and Motilal added, "We estimate a 44% CAGR in earnings over FY24-26. We reiterate our Neutral rating with a TP of INR130 (premised on 1.1x FY26E ABV)."

While maintaining its BUY on PNB for a target price of Rs 140, Sharekhan in its note said, "Asset quality trends are quite encouraging and the outlook continues to remain strong. The bank has been guided that the quality of loans sanctioned in post-COVID times is far superior with very low delinquency. Thus, lower slippage trends are likely to sustain and narrow the perceived gap in underwriting concerning peers. Credit cost is expected to fall below 1% in FY25E, which should support RoA closer to 1% in FY25E. Additionally, improvement in operating performance led by fee income and opex is expected to support earnings."

As on 31st March 2024, the Bank has 10,138 branches including 2 International Branches. The bank also has 12,131 ATMs and 33,614 BCs as part of its distribution network.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.