Why PNB shares hit 10% lower circuit today?

Shares of state-owned Punjab National Bank (PNB) were reeling under selling pressure on Thursday, in line with the broader market, with stock price hitting a 52-week low on domestic bourses. PNB shares were locked in a lower circuit of 10% after its fourth-quarter earnings failed to meet Street estimates. In comparision, the BSE Sensex was trading 990 points, or 1.83%, lower at 53,097 levels.

Reacting to Q4 results, PNB share price opened with a loss of 4.23% at ₹31.70 as compared to the previous day's closing price of ₹33.1 on the BSE. The stock slid further and was locked at the 10% lower circuit at ₹29.45 on the BSE.

PNB shares have declined consistently in the past seven sessions and have plunged 14.84% during this period. The banking stock has delivered a negative return of 19.5% in a month, 29% over a six-month period, and 22% on a year-to-date basis (YTD). The share price has fallen 20% in one year, while it has tumbled 65% and 82% in three years and 5 years, respectively.

For the January-March quarter of FY22, PNB reported a 66% year-on-year (YoY) decline in net profit to ₹201 crore as the lender set aside ₹325 crore on account of fraud. The PSU lender had posted net profit of ₹586 crore in the corresponding quarter last year. For the full financial year, the state-owned bank reported a net profit of ₹3,457 crore compared to ₹2,022 crore a year ago.

The lender's net interest income (NII) rose 5% to ₹7,305 crore from ₹6,957 crore in the same quarter last year. The total income during January-March 2022 stood at ₹21,095 crore as against ₹21,386 crore in the same period previous fiscal.

On the asset quality front, the bank’s gross non-performing assets (GNPA) as a percentage of gross advances dipped to 11.78% from 14.12% a year ago. Net NPA too declined to 4.80% from 5.73% in Q4 FY21.

However, the bank continued with higher provisions for bad loans and contingencies for the March quarter of FY22 at ₹4,851.47 crore, as against ₹3,540.32 crore earlier. Its slippages ballooned 110.8% sequentially to ₹10,506 crore

The bank's board has also recommended a dividend of ₹0.64 per equity share for the financial year 2021-22.

Despite weak earnings, global brokerage Morgan Stanley has maintained an 'equal-weight' rating on PNB with a target price of ₹41 apiece, a potential upside of 23.9% from Wednesday's closing price.