Shares of state-owned Punjab National Bank (PNB) jumped 5.6% to hit a two-month high of ₹111.70 apiece during Monday’s trade, 20 July, defying the weak sentiment on Dalal Street as investors cheered the bank’s strong performance for the quarter ended June.
The bank reported a healthy Q1FY27, with net profit surging 214% year-on-year to ₹5,253 crore, driven by improving core operating performance and continued strengthening in asset quality. The state-owned lender had posted a net profit of ₹1,675 crore in the corresponding quarter of the previous year.
On the operational front, net interest income (NII) increased 4% quarter-on-quarter, while net interest margin (NIM) expanded by 6 basis points sequentially, aided by lower funding costs and the continued run-down of low-yielding advances.
The management expects NIM to improve further through FY27 as the residual low-yield IBPC exposure matures and high-cost deposits continue to reprice. The bank is also targeting FCNR deposit mobilisation of USD 2.5 billion, which is expected to provide additional support to funding costs.
Core profitability benefited from lower operating expenses and sharply lower PSLC costs, with the management guiding for a cost-to-income ratio of 47–48% by the end of FY27.
Reflecting the improvement in operating performance, the bank’s operating profit rose 6% year-on-year to ₹7,519 crore during the quarter, compared to ₹7,081 crore in the same period last year.
Asset quality also continued to improve during the quarter. Gross Non-Performing Assets (GNPA) in absolute terms declined by ₹7,292 crore to ₹35,381 crore from ₹42,673 crore, while Net Non-Performing Assets (NNPA) fell by ₹699 crore to ₹3,433 crore from ₹4,132 crore as of June 2025.
Similarly, the net NPA ratio declined to 0.26% from 0.38% in the year-ago period. However, provisions for bad loans increased to ₹792 crore during the first quarter, compared with ₹396 crore in the corresponding quarter last year.
Brokerages raise earnings estimates
According to Motilal Oswal, PNB reported a mixed quarter, with the earnings beat driven by controlled provisions and operating expenses, while margins improved by 3 basis points sequentially. The brokerage noted that provisions remained lower, reflecting strong asset quality, while operating expenses declined due to fewer AS-15 provisions and lower PSLC costs.
It revised its earnings estimates upward by 8.5% for FY27 and 4% for FY28 and projects an FY27 return on assets (RoA) of 1.06% and return on equity (RoE) of 15.4%, while reiterating its ‘BUY’ rating on the stock with a target price of ₹135, based on 0.9x FY28E adjusted book value (ABV).
Meanwhile, JM Financial upgraded the stock to ‘ADD’ with a revised target price of ₹120 (from ₹110 earlier), valuing the bank at 0.8x FY28E BVPS. The brokerage also raised its FY27E and FY28E EPS estimates by 18% and 15%, respectively, reflecting an improved earnings outlook.
It stated that PNB has continued to execute well, supported by improving core profitability, healthy asset quality trends, and a more favourable loan mix. The brokerage added that the FCNR mobilisation opportunity provides incremental support to funding costs.
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