PNB shares gain up to 8% after Q2 results - Should you buy or sell?

Punjab National Bank shares rose up to 8% following Q2 results that beat profit estimates. Analysts offered mixed views: CLSA gave an outperform rating with a ₹140 target, while Citi maintained a sell recommendation with a ₹110 target despite improved metrics.

Shares of Punjab National Bank gained 7% on Monday, October 19, reacting to their second quarter results. The stock is among the top gainers on the PSU Bank index.

While the stock sees healthy gains, global investment banking firms CLSA and Citi have divergent views on the stock. CLSA is the bull, while Citi has a "sell" rating on the stock.

CLSA Recommends Buying PNB

CLSA has an "outperform" rating on PNB and a target price of ₹140 per share. This indicates an upside of 20.4% from its previous closing price.

It said the lender's second quarter profit after tax (PAT) beat estimates by 20%, driven by a beat on net interest income (NII) and one-off recoveries, partly offset by lower other income.

The bank's loan growth accelerated to 16% from the previous year from low double-digits a few quarters ago, CLSA said. Its deposit growth remains stable at 10% from last year.

Punjab National Bank reported an improvement of 8 basis points in its net interest margin (NIM), subsequently driven by loan yields and deposit cost.

The management has guided that the NIM could improve further. Its asset quality was stable, with a gross slippage ratio of 0.8%, CLSA added.

Citi Says Sell PNB

Citi has a "sell" recommendation on the Punjab National Bank stock. It has raised its target price to ₹110 per share from its previous ₹103. This implies a 5.4% decline from its previous closing price of ₹116.3 apiece.

The runoff of wholesale deposits via FCNR inflows trimmed its cash on deposits by 5 basis points, while it continued paring of retail IBPC and low-yielding corporate exposure lifted yields by 8 basis points, Citi said.

The release in standard asset provisioning offset non-performing assets (NPA) and floating provision buffers, pushing its credit cost to near zero, Citi said.

PNB's return on assets held firm above 1%. Its global advances climbed 14.7% from last year and 5.3% from the previous quarter, outpacing the FY27 guided 12% - 13% band, aided by FCNR-funded overseas exposure, which was 1.5% of the book.

Stock reaction

Of the 23 analysts who have coverage on the Punjab National Bank stock, 14 have a "buy" rating, three have a "hold" rating and six have a "sell" rating.

Shares of Punjab National Bank gained 7.8% to hit an intraday high of ₹125.22 apiece on Monday. The stock was trading 5.2% higher at ₹122.4 apiece. The stock has risen 5% in the last one month.