Asset quality improved sharply. Gross non-performing assets (GNPA) fell to Rs 44,082 crore (3.95% of loans) during the quarter, from Rs 56,343 crore (5.73%) a year earlier. Net NPA declined to 0.4% from 0.73%, with provision coverage improving to 96.82%. Slippages, however, rose sequentially to Rs 30,000 crore, primarily from the MSME and agriculture segments.
Emkay Global
Emkay Global retained its ‘Buy’ rating on the bank, citing healthy credit growth and recovery-led asset quality gains, despite some moderation in margins. “PNB continues to deliver system-beating gross credit growth at 13.6% YoY, though higher cost of deposits drove NIM contraction. Management expects NIM to stabilise at 2.8–2.9% in H1FY26 and improve slightly in H2,” the brokerage said.
Emkay projected a return on assets (RoA) of 0.9–1% over FY26–28, driven by better treasury income and lower credit costs. The brokerage maintained a target price of Rs 125, valuing the bank at 0.9x FY27E standalone ABV, implying a potential upside of 32% from the current market price of Rs 94.55.
Kotak Institutional Equities
Kotak Institutional Equities maintained an ‘Add’ rating with a target price of Rs 110, implying a 16% upside. The brokerage noted that while asset quality is among the best in the PSU banking space, the sustainability of core profitability is a concern.
RoA was steady at about 1%, with RoE at about 14% in 4QFY25, the brokerage noted, adding that NIM declined approximately 10 bps QoQ to 2.9% as cost of funds remained elevated. Recoveries and treasury income provided a significant boost to earnings, but core operating profitability remains weaker than peers such as Bank of Baroda and Union Bank, Kotak Equities said.
“Core operating profitability has been weaker than peers, and the idea that RoA in the medium term will be supported by non-core items (treasury and bad loan recoveries) makes PNB a relatively less exciting idea than peers (BOB, Union and Canara) at a similar valuation multiple,” the brokerage said.
The brokerage said it expects a shift to the lower tax regime in FY26 to provide some support to earnings, but sees limited rerating potential unless core profitability improves.
Motilal Oswal
Motilal Oswal also reiterated its ‘Buy’ call with a target price of Rs 125, estimating nearly 32% potential upside. The brokerage highlighted that while NII came in below estimates due to margin compression, other income was robust, and loan growth remains healthy at 15.3% YoY.
Slippages rose 69% QoQ to Rs 30,000 crore, but asset quality ratios improved due to higher write-offs, the brokerage said, adding that it expects RoA/RoE to reach 1.05%/15.5% by FY27.
Margins are expected to remain under pressure in 1HFY26 but should improve in the second half, Motilal Oswal said.
The brokerage noted that PNB’s credit-deposit ratio (CD ratio) declined to 68.8%, providing some room for margin improvement if deposit costs stabilise. It also highlighted the improving SMA-2 book, which fell to 0.02% of loans, indicating limited stress build-up.
With shares trading flat at Rs 94.55 on Thursday, valuations appear attractive, but investors may need to wait for margin trends to bottom out before a sustained re-rating unfolds.
Also read | PNB Q4 Results: Net profit surges 52% YoY to Rs 4,567 crore
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