PNB: NPA Woes Picking----Nr. Term Range (140-200)

Technically, PNB (CMP:154) has some good support of around 151-149-147 zone & sustain below 147, that it may again fall to 141-138 zone, which is a strong positional support (demand zone). Consecutive closing below 138, it may further crashed to 134-131-128-117-104 zone in the worst bear market scenerio.

On the up side,  sustain above 151, immediate target may be 159-162-164. Consecutive closing above 162, PNB may target 172-180-200 in the short to medium term. In the long term, only sustaining above 200, it may scale 230-240 & 275 zone (FY:16-17) in the bull case scenerio.

Bottom Line : Positional Technical Trading Levels

	SL</>2	FROM SLR
		PNB	CMP	154
			T1	T2	T3	T4	T5	T6	T7	SLR
Strong >	151-149		156	159-162*	164-169	172-180*	186	197-200	214-231	<147
Weak <	147		144-141	138*	134	131	128	117	104	>151

Current & projected (FY:16-17) techno/funda valuation of PNB as par BG metrics: 165 & 195-220.

SCRIP	EPS(TTM)	BV(Act)	P/E(AVG)	LONG TERM	SHORT TERM	MEDIAN VALUE	200-DEMA	10-DEMA
PNB	16.91	198.28	10	170.56	160.26	165.41	172.04	151.88

PNB

22.55

212.75

10

196.96

185.06

191.01

172.04

151.88

PNB

29.55

244.65

10

225.47

211.85

218.66

172.04

151.88

Recent Q4 result of PNB is well below street estimate owing to higher provisions (due to RBI March'15 provisioning factor), flat OP & lower NII but got some support from other income (Fee based non-interest income & trading profit) and tax gain.

Due to the higher provisioning factors for restructured loan portfolios from April'15 onwards, probably all PSU banks including PNB has shown significantly higher provision in the March'15 QTR (for PNB its 7800 Cr) in advance, which they might show in the subsequent quarters under normal course. So, in that sense this higher provisioning may be one time accounting adjustments on the part of PSB(s).

Going ahead, PNB management has indicated that no such big restructuring (CDR) in the near future and less fresh slippages. But as most of the CDR(s) are from steel, cement, power and construction segments for PSB(s), any significant improvement of earnings for them will highly depend on real pick up of overall economic & industrial activity or performance of core sector. Further PSB(s) has to address their own capital shortage due to severe amount of accumulated NPA(s) in the system (nearly 2.5-3 L Cr).  As of now, Govt is doing little for their recapitalization issues and market condition is also not in their favour for raising fresh capital. So, in the coming quarters, they are likely to focus more on their NPA recovery and corporate/industry credit growth is probably to be muted. Also due to lack of real uptick in overall economic recovery, there is not so much demand for fresh loans/funds from most of the industry either. Corporate/industry loan demand may recover only in the H2 of FY-16-17 after visible all round economic recovery, thanks to "Modinomics".

Thus all banks including PSB(s) & Privates and specially PNB is focusing more on retail loans at this point of time. In the mean time, possible further rate cut (0.25% in June & 0.25% in Dec) by RBI and its subsequent real transmission time gap by them will help their bottom line (NII & NIM) significantly. Also most of them may de-leverage their balance sheet by listing their insurance arms in the near future (like PNB Met Life).