Punjab National Bank (PNB) :: Angel Broking Diwali Top Picks (Diwali Muharat)

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 Punjab National Bank (PNB)'s loan growth in the last 2 years has been conservative
at 5.1% and 13.1% in FY2013 and FY2014 respectively. However, with the economic
cycle expected to turnaround, growth rate should pick up in FY2016.
 With economic cycle improving, recoveries are likely to improve going forward.
PNB has a large pool of bad loans with Gross NPA of `19,604cr (5.5% of advances
and 52.6% of net worth), restructured book of `34,012cr (9.8% of advances and
91% of net worth) and written off accounts of `6,550cr (1.9% of advances and
17.6% of net worth). While this had depressed its book value and valuations so far,
once the recovery cycle picks up steam, the bank is likely to be among the bigger
beneficiaries.
 In last ten years, PNB has traded at an average P/ABV multiple of 1.3x and in the
range of 0.9x to 1.5x. Currently PNB is trading at a valuation of 0.8x FY2016
P/ABV. We expect the P/ABV multiple to expand over the next few years due to
higher growth, better asset quality and return metrics. WWWe maintain our Buy e maintain our Buy
recommendation with a target price of recommendation with a target price of ```1,109. 1,109