powerfulpicks short and medium term call: Some of the PSU banks are still looking quite attractive.
One of them is PUNJAB NATIONAL BANK (PNB). It is the 2nd largest PSU bank after SBI. From 280 in March 2009, it had reached 1327 on Sep 16th 2010 and is currently just around 1300. With an under-10 P/E and a book value over 510, I can say that there is still some healthy steam left in PNB at current market prices. And with 5000+ branches, PNB is can easily leverage the story of India rapidly growing.
NIM or net interest margin [(Total Interest Income - Total Interest Expense)/Total Earning Assets] is a measure of profitability of the bank and the primary yardstick by which investors rate a bank prior to investment. PNB's NIM rose to 3.94% recently, which looks very healthy. For Q1FY11 (June 2010 end), PNB reported a net profit of Rs 1,068 crores versus Rs 832 crores, a growth of 28.37% on a year-over-year basis (YoY); net interest income (NII) rose 40.67% to Rs 2,619 crores from Rs 1,861.8 crores YoY. It reported a near 25% increase in year ending on March 31, 2010, due to higher interest income.
PNB has plans to double its revenues from international operations by 2013. It has foreign branches in Hong Kong, Kazakhstan, Shanghai, Singapore, Kabul and Dubai, as well as a subsidiary in the UK, and is expanding in more overseas markets. It also plans to upgrade its representative office in Norway into a full-fledged branch. The bank will soon start a subsidiary in Canada to tap the country's significant Punjabi population.
Further, PNB is looking to benefit from bilateral-trade business opportunities by planning a foray into African markets like South Africa and Ghana and the South Asian nation, Indonesia. PNB has also decided to acquire a 64% stake in JSC Dana Bank for USD 24 million in order to grow inorganically in Kazakhstan.
Start accumulating around 1285-1290, adding more on dips for a short term (2-3 months) target of 1386 and a medium term (4-6 months) target of 1510 (+17%)
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