Why PNB Share Price is Rising

Earlier this week, PSU bank stocks got a shot in the arm after experts noted that the favorable credit environment has bolstered the asset quality of select PSU banks.

Furthermore, there are some state-run lenders that are lagging by one to two years in their earnings recovery cycle.

Among the lot, Punjab National Bank (PNB) share price has gained the most ever since this update.

Apart from the positive sectoral update by brokerages, PNB share price is also gaining traction due to two other reasons.

In the past five days, PNB share price has rallied more than 15%, with most of the gains coming in yesterday's session.

Let's find out why PNB share price is rising and what lies ahead...

Breakout on Charts

The primary reason why PNB shares have gained such strong traction in the past couple of days is because they surpassed the previous high touched 5 years back.

When a stock surpasses a multi-year breakout, it's often seen as a significant bullish signal by investors and traders.

While I'm no technical expert, this breakout indicates that the stock has overcome a long-standing resistance level.

This movement is often fueled by a combination of factors, including increased visibility, technical analysis, and a possible improvement in the company's fundamentals.

Group Company Receives Rating Upgrade

The other possible factor fuelling the surge in PNB share price could be one of its group companies getting a rating upgrade from CARE.

PNB Housing Finance, which is the housing finance arm of PNB, has seen a big spike in the past two trading sessions after rating agency CARE Ratings upgraded various facilities/instruments of the housing finance arm.

Interesting to note that the rating upgrade also considered the brand linkages with Punjab National Bank (PNB), the promoter of PNB Housing Finance and the consistent support derived from the promoters.

PNB Housing Finance has a strong market position and it's the third-largest housing finance company (HFC) in India with a diversified profile.

What Next?

Over the years, PNB has lost market share to private banks as they have ramped up their corporate business and leveraged their strong deposit franchises to offer lower rates.

However, the bank's business has been recovering, which explains the growth in advances. It has turned the losses into profits in the past four years.

Between 2019-2023, the bank's advances have grown at a CAGR of 13.8%. Asset quality has improved, as depicted in the falling levels of net NPAs.

The net NPAs have halved, falling from 11.2% in the financial year ending 2018 to 0.99% in the financial year ending 2023.

The stellar performance puts the lender on the fast track to hoovering up all the benefits from robust capital spending and the credit demand offtake.

Even foreign investors have upped their stake in the PSU bank for the past three quarters.

Despite a 16.5% fall in net profits in the financial year 2023, PNB maintained its dividend payout by paying Rs 0.64 per share in dividends. And now, with a 3x year-on-year jump in net profit in the nine months ending December 2023, there is a good chance the bank will not just maintain but enhance its dividend payouts.

Moreover, PNB has also seen growth in internet banking users.

It has also introduced several innovative digital initiatives, including cash withdrawal using the Unified Payments System (UPI), linking credit cards on the BHIM PNB app, and enabling the blocking or disabling of credit cards through WhatsApp.

It's clear that PNB is committed to staying at the forefront of technological advancements and there is a long way to go.

Furthermore, the management is keen on reducing non-performing asset (NPA) provisions and aims for increased profitability through the recovery of outstanding amounts.

How PNB Share Price has Performed Recently

In the past five days, PNB share price has rallied over 9%.

In 2024 so far, the stock is up 40%.

PNB has a 52-week high of Rs 136.7 touched on 3 April 2024 and a 52-week low of Rs 46 touched on 5 April 2023.

In the past one year, PNB share price has surged 191%.

Here's a table comparing PNB with its listed peers -

Comparative Analysis

Company	PNB	Bank of Baroda	Bank of India	Canara Bank	Union Bank of India
ROE (%)	3.3	14.9	7.5	16.4	12.2
ROCE (%)	5.9	13.3	9.4	14.8	12.9
Latest EPS (Rs)	6.9	36.5	14.1	80.8	17.4
TTM PE (x)	19.5	7.5	10.3	7.5	9.1
TTM Price to book (x)	1.5	1.2	1.1	1.3	1.3
Dividend yield (%)	0.5	2.0	1.4	0.5	1.9
Industry PE	11.7
Industry PB	1.7

Data Source: Ace Equity, Equitymaster

About PNB

PNB is one of the largest PSU banks in India. It has a strong distribution network of 10,925 domestic branches, 13,914 ATMs, and two international branches.

After amalgamation of Oriental Bank of Commerce and United Bank of India with PNB, it had a customer base of over 180 million.

For more details about the company, you can have a look at the PNB fact sheet and quarterly results on our website.

You can also compare PNB with its peers.

PNB vs SBI

PNB vs HDFC bank

PNB vs AU small finance bank

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...