UBS initiates coverage on Punjab National Bank with Neutral, Rs120

 UBS Securities India has initiated coverage of Punjab National Bank (PNBK.BO) with a Neutral rating and a 12‑month price target of Rs120, analyst Yash Agarwal said. The call values PNB via SOTP — core bank at Rs105 (0.9x one‑year forward P/BV) plus Rs15 for subsidiaries — and reflects a balanced risk‑reward given modest return expectations. UBS expects the improving state‑owned bank (SOE) backdrop to underpin a “steady 12% CAGR in loans for PNB over FY25‑28E,” driven by the RAM mix (Retail, Agri, MSME) at a 13% CAGR. However, near‑term net interest margins are likely to be pressured by a special deposit scheme and a higher share of non‑MCLR liabilities before gradually recovering to 2.9% by FY28E; UBS models a 9% NII CAGR. The bank’s strong historical recoveries (Rs960bn over seven years) helped credit costs fall to 0.17% in FY25, but UBS forecasts normalization and a dip in ROA/ROE to about 0.9%/13% in FY26‑28E. “SOE Banks: Growth outlook modest; fairly priced,” UBS wrote, adding that sector improvement should support loan growth. Upside risks include higher margins or continued benign credit costs; downside risks are slower loan growth or rising credit costs. Current price: Rs114.55 (06 Oct 2025); implied upside to target ~4.8%.