InvestorQ : Moody’s has recently upgraded Punjab National Bank. What is the reason for this upgrade and can I buy PNB at current prices?
Khushi Patel made post

Moody’s has recently upgraded Punjab National Bank. What is the reason for this upgrade and can I buy PNB at current prices?

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Anjana Aiyar answered.
1 year ago
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Moody’s affirmed the rating of PNB at “Ba1”, which is the current rating but changed the outlook for the bank to positive. This decision by Moody’s was driven by the recent announcement by the FM to merge PNB, Oriental Bank of Commerce and United Bank of India. This 3-way merger will create a much larger combined entity and the cost rationalization and the centralization of treasury operation will help PNB as an entity to become bigger and more profitable. It will also result in the bank improving its capital adequacy and also reducing its NPA percentage.

The bank has been under a lot of pressure in the last 2 years since the Nirav Modi case entailing a $2 billion fraud first came to light. The FM in her last press conference shrank the number of PSU banks from 10 to 4 to create banks with economies of scale and a more workable business model. Rating has been affirmed by Moody’s but the outlook for PNB post the merger has been raised. At the current market price the downside risk on the stock is quite limited and one can look to buy PNB from a longer term perspective because the benefits of the merger will take some time to actually kick in.

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