InvestorQ : With PNB reporting profits in the June quarter is it time to again start accumulating the stock at current prices?
indhumathi Sayani made post

With PNB reporting profits in the June quarter is it time to again start accumulating the stock at current prices?

Answer
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shrinidhi Rajan answered.
1 year ago


While the stock may look relatively underpriced at the current market price, it may be tempting to jump into the stock. However, you must look a little deeper into the quarterly numbers before taking a buy call on the stock of PNB. The company reported a net profit of Rs.1018 crore but this was largely driven by lower provisions and the asset quality has actually deteriorated in the interim period.

For example, the Gross NPAs of PNB has actually gone up from 15.5% to 16.5% during the quarter while the net NPAs are up from 6.56% to 7.17%. That means there has been a definite fall in asset quality. Even if you look at the net interest income (NII) of PNB, it was down 11.7% at Rs.4141 crore. The profits could have been a lot worse had it not been for the provisions falling from Rs.10,000 crore to Rs.2000 crore in the last one year.

Looking ahead, the bank expects the gross NPAs to fall below the 12% mark by year end but that does appear difficult considering that the bank has only recently announced a major fraud committed by promoters of Bhushan Power. It is best to be cautious about this stock and stick to names like SBI and BOB in the PSU banking space.