Punjab National Bank. CMP: INR177 TP: INR260 (+46%) Buy

Transcription

1 BSE SENSEX S&P CNX 29,000 8,757 Bloomberg PNB IN Equity Shares (m) M.Cap. (INR b) / (USD b) 337.3/ Week Range (INR) 232/105 1, 6, 12 Rel. Per (%) -23/-21/17 Avg Val INRm/Vol /1866 Free float (%) 41 Financials & Valuation (INR b) y/e MAR 2015E 2016E 2017E NII OP NP NIM (%) EPS (INR) EPS Gr. (%) BV/Sh. INR ABV/Sh ( ) ROE (%) ROA (%) Div Payout P/E(x) P/BV (x) February QFY15 Results Update Sector: Financials Punjab National Bank CMP: INR177 TP: INR260 (+46%) Buy Weak asset quality and high tax provisioning mars earnings Punjab National Bank s (PNB) 3QFY15 PAT (+3% YoY) missed estimates by 13%, despite high contribution of net trading gains (INR6.6b - 50% of PBT). Sharp rise in slippages to INR55.5b (INR39.7b in 2Q) 6.8% of annualized loans, impacted NIM (+3bp QoQ vs expectation of +15bp QoQ) and led to NII (flat YoY) miss of 5% Fresh restructuring declined QoQ to INR24.6b (3% of loans) vs INR33b (4.2%). Led by relapse from RL/repayments, OSRL declined INR343b (9.5% of loans) v/s INR368b (10.3%). Net stress addition (net slippages + change in OSRL) came in at INR14.2b (1.8%) v/s INR50.5b (6.4%) in 2QFY15. Management guided for continued pressure on asset quality for at least next two quarters. Other highlights: (1) Fees grew 6% YoY (flat QoQ) (2) Loans growth remained moderate (+2% QoQ and 11% YoY) while deposits grew 2% QoQ and 15% YoY (3) CASA ratio stable QoQ at ~40% (4) PCR including technical write offs declined 185bp QoQ to 57.3% (5) High tax rate of 40% (est. of 32%) a drag on profitability (PBT miss of just 2%) and (6) CET 1 of ~8.7% including 9MFY15 PAT Valuation and view: Balance sheet consolidation helped PNB to improve the liability profile and keep NIM at 3%+, despite high asset quality strain and volatility in interest rate. NSL (ex SEB and AI) at 11% remains significantly higher than industry however, ~55% of RL belong to Infrastructure and Iron and steel and kick start in these segments could allay concerns. While net trading gains compensated for weak core performance (PBT raise of 2%), we cut PAT estimates by ~5% for FY15 to factor in high tax rate. ROA/ROE expected to be better than peers at 0.8%/14%. Buy Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com); Vallabh Kulkarni (Vallabh.Kulkarni@MotilalOswal.com); Investors are advised to refer through disclosures made at the end of the Research Report. Motilal Oswal research is available on Bloomberg, Thomson Reuters, Factset and S&P Capital.

2 Exhibit 1: Quarterly Performance: Actual v/s estimates (INR m) Y/E MARCH 3QFY15A 3QFY15E Var. (%) Comments Net Interest Income 42,331 44,346-5 Margin stable QoQ vs expectation of +15bp (Gross slippages % Change (Y-o-Y) 0 5 expected to decline QoQ post sharp rise in 2Q) Other Income 12,908 13,082-1 Muted fees (+6% YoY) compensated by higher trading gains Net Income 55,239 57,427-4 Operating Expenses 27,732 27,207 2 Operating Profit 27,507 30,220-9 % Change (Y-o-Y) 2 12 Other Provisions 14,678 17, MTM write-back helps; credit cost remains elevated at 1.9% Profit before Tax 12,830 13,060-2 Tax Provisions 5,084 4, Tax rate at 40% v/s expectation of 32% Net Profit 7,746 8, Trading gains compensated weak core revenues, high tax % Change (Y-o-Y) rate led to 13% PAT miss Net stress loans stood at 13.3%; OSRL declined 7% QoQ Loan and deposits growth was moderate at 11% YoY (+2% QoQ) and 15% YoY (+2% QoQ) respectively. Slippages increase sharply QoQ however, net stress addition declines QoQ Gross slippages increased to INR55.5b (annualized slippage ratio of 6.8%) from INR39.7b (5.1%) in 2QFY15. Of this, INR12b came in from loans which were already restructured. During 9MFY15, out of total slippages of INR110b, INR40b came from accounts which were already restructured. Upgrades and recoveries increased to INR16.7b as compared to INR17.1b in 2QFY15. Net slippages for the quarter came in at INR38.8b (4.8%) v/s INR22.6b (2.9%) in 2QFY15. During the quarter, bank wrote-off INR24.2b (INR11.2b in 2QFY15) and resultantly, GNPA in absolute terms increased 7% QoQ. In percentage terms GNPA and NNPA was at 6.0% (5.7% in 1QFY15) and 3.8% (3.3% in 2QFY15). PCR declined QoQ to 38% from 44% in 2QFY15 (57.2% - including technical write-off vs 59.1% in 2Q). Fresh restructuring during the quarter stood at INR24.5b (INR32.9b in 2QFY15). Hence net stress addition declined QoQ to INR14.2b (INR50.5b in 2QFY15 and INR4.5b in 1QFY15). Net stress loans declined to 13.3% compared to 13.6% in 2QFY15 led by reduction in OSRL. Other highlights NIM for the quarter came in at 3.2% (stable QoQ) v/s expectation of 15bp improvement QoQ. Yield on loans declined 4bp QoQ to 9.86%. Cost of funds was largely stable at 5.1%. Opex grew 13% YoY led by 15% growth in employee related expenses. Cost to core income ratio declined 210bp to 56% in 3QFY15. Loan and deposits growth was moderate at 11% YoY (+2% QoQ) and 15% YoY (+2% QoQ) respectively. Domestic loans grew just 8% YoY and +2% QoQ. PNB capitalized on one off opportunity to grow its international loans (+40% YoY) CASA growth remains moderate at 8% YoY (+5% QoQ) led by moderate growth in CA deposits (+9% YoY and +1% QoQ) and SA deposits (+7% YoY and 1% QoQ). Domestic CASA ratio stood at 39.4%. Retail advances grew 28% YoY in 3QFY15 led by strong growth in Car/vehicle segment (+21% YoY) and Housing segment (+23% YoY). MSME segment grew 3 February

3 19% YoY (+8% QoQ) and now forms 16% of overall loans. While, Agriculture loans grew 5% QoQ and +20% YoY. Growth in infrastructure financing moderated to 6% YoY (flat QoQ) which was led by slowdown in telecom segment (-6% YoY and -1% QoQ). Growth in food processing segment was strong at 38% YoY (+30% QoQ), however formed just 3.1% of overall loans. Credit costs during 3QFY15 came in at INR 17.2b (1.9% of loans). Bank benefited from the decline in systemic yields with trading gains of INR2.1b (INR1.2b in 2Q) and reversal of MTM provisions on investment book of INR4.5b (INR260m in 2Q). Conference call highlights P&L related Provision break-up: NPA provision (INR17.2b); Standard assets (INR1.4b), Investment depreciation (INR -4.5b); Others (INR0.6b) Non-interest income break-up: Commissions (INR7.2b); Forex Income (INR1.8b); Trading gains (INR2.1b); Recovery from w/off accounts (INR1.1b), Dividend from MF (INR 0.8b) Tax rate higher (40%) on account of higher write-back on investment depreciation Increase in C/I ratio on account of pension related provisioning (INR8.5b) vs (INR6.5b in 3QFY14) Asset Quality Higher stress expected over the next 2 quarters; recoveries to pickup Q4 onwards Movement of NPA: Slippage (INR55.5b), Cash recovery (INR10.8b), Upgrades (INR5.8b) and Write-offs (INR24b) Sector-wise GNPA (INR222b): Agriculture (INR33.2b), MSME (INR56b), Retail (INR10b), Others (INR123b; incl. Iron & Steel INR24b, Textiles INR10b) O/S Restructured loans at INR343b, out of which SEB INR58b, AI INR16b Restructuring pipeline at INR6.5b Slippage from restructuring book in 3Q - INR12b; 11.8% slippage & 10.2% upgrades from restructuring book in 9MFY15 Out of INR110b slippages in 9MFY15, INR40b came from restructured loans Others Market Share in Deposits - 4.9%; Market Share in Credit - 4.9% CET 1 including 9M profits at 8.7% SLR cut of 50bps is going to release INR25b but do not see the money getting deployed due to lack of credit demand PNB raised INR15b through AT1 bonds during the quarter The bank is planning for QIP/FPO post March February

4 Buy with a target price of INR260 (1.0x FY17E BV). Valuation and view Gross slippages increased QoQ led by though macro environment and continued relapse from restructured loans. PNB remains highly levered to resolution of policy bottlenecks and improvement in economic growth. NSL (ex SEB and AI) at 11% remains significantly higher than industry however, ~55% of RL belong to Infrastructure and Iron and steel and kick start in these segments could allay concerns. Balance sheet consolidation helped PNB to improve the liability profile and keep NIM at 3%+, despite high asset quality strain and volatility in interest rate. While net trading gains compensated for weak core performance (PBT raise of 2%), we cut PAT estimates by ~5% for FY15 to factor in high tax rate. We tweak estimates for FY16/17 by ~4%/2%. ROA/ROE is expected to be better than peers at 0.8%/14%. PNB trades at 0.8x/0.7x FY16/17 BV. Buy with a target price of INR260 (1.0x FY17 BV). Exhibit 2: Cut in FY15 estimates driven by higher tax rate INR B Old Est. Rev. Est. Chg. (%) FY15 FY16 FY17 FY15 FY16 FY17 FY15 FY16 FY17 Net Interest Income Other Income Total Income Operating Expenses Operating Profits Provisions PBT Tax PAT Margins (%) Credit Cost (%) RoA (%) RoE (%) Exhibit 3: One year forward P/BV PB (x) Peak(x) Avg(x) Min(x) Exhibit 4: One year forward P/E PE (x) Peak(x) Avg(x) Min(x) Jan-05 Apr-06 Jul-07 Oct-08 Jan-10 Apr-11 Jul-12 Oct-13 Jan-15 Jan-05 Apr-06 Jul-07 Oct-08 Jan-10 Apr-11 Jul-12 Oct-13 Jan-15 3 February

5 Exhibit 5: DuPont Analysis: Highly levered to macro-economic conditions expect RoA to improve gradually (%) FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015E FY2016E FY2017E Net Interest Income Fee income Fee to core income Core Operating Income Operating Expenses Cost to Core Income Ratio Employees Emp cost to Opex (%) Others Core operating Profits Trading and others Operating Profits Provisions NPA Othes PBT Tax Tax Rate RoA Leverage (x) RoE Exhibit 6: DuPont Analysis: Strong opex control and lower NPA provisioning led to QoQ improvement in profitability (%) Y/E MARCH 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 Net Interest Income Fee income Fee to core income (%) Core Income Operating Expenses Cost to Core Income (%) Employee cost Emp cost to Opex (%) Others Core operating Profits Trading and others Operating Profits Provisions NPAs Others PBT Tax Tax Rate (%) RoA February

6 Story in charts Exhibit 7: Loan growth mainly led by Retail and MSME segments Loans (INR b) YoY Gr. (%) Exhibit 8: Deposit growth remains moderate Deposits (INR b) YoY Growth (%) QFY12 1HFY12 9MFY12 FY12 1QFY13 1HFY13 9MFY13 FY13 1QFY14 1HFY14 9MFY14 FY14 1QFY15 1HFY15 9MFY15 1QFY12 1HFY12 9MFY12 FY12 1QFY13 1HFY13 9MFY13 FY13 1QFY14 1HFY14 9MFY14 FY14 1QFY15 1HFY15 9MFY15 2,429 2,490 2,626 2,938 2,945 2,947 2,973 3,088 3,051 3,139 3,261 3,493 3,475 3,571 3,625 3,241 3,418 3,565 3,796 3,854 4,007 3,858 3,916 3,968 4,057 4,206 4,514 4,449 4,735 4,841 Exhibit 9: Margin have deteriorated over the last 2-3 quarters (%) Exhibit 10: GNPA in absolute increased 7% QoQ; PCR declines QoQ GNPA (%) NNPA (%) PCR (cal %) 3.5 1QFY12 2QFY12 3QFY QFY12 1QFY13 2QFY QFY13 4QFY13 1QFY QFY QFY14 4QFY14 1QFY15 2QFY15 3QFY QFY12 1HFY12 9MFY12 FY12 1QFY13 1HFY13 9MFY13 FY13 1QFY14 1HFY14 9MFY14 FY14 1QFY15 1HFY15 9MFY15 Exhibit 11: Net slippages increased sharply QoQ Exhibit 12: Credit costs elevated (%) Net Slippages (INR b) Net Slipapge Ratio (%) QFY QFY12 3QFY12 4QFY12 1QFY QFY13 3QFY13 4QFY13 1QFY QFY14 3QFY QFY14 1QFY15 2QFY15 3QFY QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 3 February

7 Exhibit 13: Quarterly Snapshot FY14 FY15 Variation (%) Cumulative Numbers INR m 1Q 2Q 3Q 4Q 1Q 2Q 3Q QoQ YoY 9MFY14 9MFY15 YoY Gr (%) Profit and Loss Interest Income 104, , , , , , , , ,648 8 Loans 78,747 80,228 82,464 82,491 88,357 86,542 87, , ,257 9 Investment 24,393 25,683 25,988 26,594 25,985 26,092 26, ,064 78,194 3 Others 905 1,424 1,387 1,928 1,544 1,987 2, ,715 6, Interest Expenses 64,970 67,180 67,628 70,995 72,090 73,109 73, , , Net Interest Income 39,075 40,155 42,211 40,018 43,797 41,512 42, , ,640 5 Other Income 13,421 8,993 9,384 13,969 12,364 15,584 12, ,798 40, Trading profits 2, ,890 1,490 1,250 2, ,610 4, Forex Income 1,620 1,610 1,070 1, ,280 1, ,300 4,000-7 Recoveries , ,830 1, ,400 6, Div. from Liquid MF , ,340 2, Core Fees 7,481 5,863 6,804 7,479 8,294 7,194 7, ,148 22, Total Income 52,496 49,149 51,596 53,987 56,161 57,096 55, , , Operating Expenses 22,758 23,800 24,572 22,253 24,908 28,335 27, ,130 80, Employee 16,159 16,587 17,580 14,778 17,674 20,341 20, ,327 58, Others 6,598 7,213 6,991 7,475 7,235 7,995 7, ,803 22,675 9 Operating Profits 29,738 25,348 27,024 31,734 31,253 28,760 27, ,110 87,521 7 Provisions 10,665 18,987 15,900 21,387 9,276 17,679 14, ,553 41,633-9 NPA provisions 6,750 10,050 10,830 17,550 13,660 16,380 17, ,630 47, Provisions on Invst ,430 2, , ,450 1, ,540-8, Others 2,995 4,507 2,880 3, ,559 1, ,383 2, PBT 19,073 6,361 11,123 10,347 21,977 11,081 12, ,558 45, Taxes 6,320 1,306 3,569 2,284 7,926 5,328 5, ,196 18, PAT 12,753 5,055 7,554 8,064 14,051 5,753 7, ,362 27,550 9 Ratios (%) Fees to Total Income Cost to Core Income Tax Rate CASA (Cal) Loan/Deposit Yield, cost movement (%) Yield on loans Yield On Investments Yield on Funds Cost of Deposits Cost of Funds Spreads Margins Margins - Cumulative (%) Yield on loans Yield On Investments Yield on Funds Cost of Deposits Cost of Funds Spreads Margins Franchise Branches 5,929 6,019 6,075 6,200 6,340 6,351 6,406 ATM 6,460 6,577 6,698 6,940 7,717 7,954 8,209 3 February

8 Exhibit 14: Quarterly Snapshot continued FY13 FY14 FY15 Variation (%) INR b 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q QoQ YoY Balance Sheet Loans 2,945 2,947 2,973 3,088 3,051 3,139 3,261 3,493 3,475 3,571 3, Investments 1,207 1,290 1,305 1,299 1,330 1,341 1,434 1,438 1,383 1,446 1, Assets 4,592 4,720 4,700 4,789 4,811 4,943 5,219 5,504 5,468 5,663 5, Deposits 3,854 4,007 3,858 3,916 3,968 4,057 4,206 4,514 4,449 4,735 4, Deposits Break Up Core Deposits 3,000 3,174 3,267 3,426 3,619 3,531 3,684 3,858 4,037 3,922 4, % of total Deposits Other Deposits % of total Deposits Deposits Break Up CASA Deposits 1,331 1,434 1,424 1,533 1,499 1,564 1,610 1,729 1,636 1,716 1, % of total Deposits Savings 1,074 1,154 1,171 1,235 1,232 1,302 1,338 1,414 1,366 1,421 1, % of total Deposits Current % of total Deposits Term Deposits 2,522 2,573 2,433 2,382 2,469 2,493 2,597 2,785 2,813 3,019 3, % of total Deposits Loan Break Up Agriculture SME Loans Retail Loans Other loans 1,896 1,939 1,941 2,059 2,013 2,022 2,023 2,109 2,150 2,177 2, Investment book HTM AFS and HFT AFS (%) SLR (%) M. duration (Yrs) - Portfolio AFS Asset Quality Movement of NPA -Quarterly Opening Additions Deductions Cash Recovery Upgradation Write offs Closing Net Slippages Net Slippage Ratio (%) Credit cost (%) February

9 Corporate profile: Punjab National Bank Company description Punjab National Bank (PNB) was incorporated in 1894 in Lahore. It is one of India s largest nationalized public sector banks in terms of business and number of branches. As of December 2014, it had loan book size of INR3.6t and deposits of INR4.8t. It has a wide distribution network having pan-india presence with a total of 6,406 branches and 8,209 ATMs. Government holds 59% stake in the bank. Exhibit 15: Sensex rebased Punjab Natl.Bank Sensex - Rebased Feb-14 May-14 Aug-14 Nov-14 Feb-15 Exhibit 16: Shareholding pattern (%) Dec-14 Sep-14 Dec-13 Promoter DII FII Others Note: FII Includes depository receipts Exhibit 18: Top management Name Designation Gauri Shankar K Veera Brahmaji Dr. Ram S. Sangapure D K Jain Executive Director Executive Director Executive Director General Manager (Treasury) Exhibit 17: Top holders Holder Name % Holding LIC of India Money Plus 1 Secured Fund (31) 11.2 Lazard Asset Management LLC A/c Lazard Emerging 3.8 HDFC Trustee Company Ltd HDFC Capital Protection 2.3 ICICI Prudential Nifty ETF (21) 1.2 Exhibit 19: Directors Name Dilip Kumar Saha Tara Chand Jhalani Gautam Premnath Khandelwal D K Singla Sunil Gupta M N Gopinath Name R S Sangapure Gauri Shankar K Veera Brahmaji Anurag Jain B P Kanungo *Independent Exhibit 20: Auditors Name Borkar & Mazumdar CVK & Associates G S Madhava Rao & Co K N Gutgutia & Co Phillipos & Co Ramesh Kapoor & Co Type Statutory Statutory Statutory Statutory Statutory Statutory Exhibit 21: MOSL forecast v/s consensus EPS (INR) MOSL forecast Consensus forecast Variation (%) FY FY FY February

10 Exhibit 1: Financials - Valuation metrics 61.89Rating CMP Mcap EPS (INR) P/E (x) BV (INR) P/BV (x) RoA (%) RoE (%) (INR) (USDb) FY16 FY17 FY16 FY17 FY16 FY17 FY16 FY17 FY16 FY17 FY16 FY17 ICICIBC* Buy HDFCB Buy 1, AXSB Buy KMB* Neutral 1, YES Buy IIB Buy VYSB Neutral FB Buy JKBK Buy SIB Buy Private Agg SBIN (cons)* Buy PNB Buy BOI Neutral BOB Neutral UNBK Buy INBK Buy CRPBK Neutral ANDB Buy IDBI Neutral DBNK Neutral Public Agg HDFC* Buy 1, LICHF Buy DEWH Buy IHFL Buy IDFC Neutral RECL Buy POWF Buy SHTF Buy 1, MMFS Neutral BAF Buy 4, ,137 1, NBFC Agg *Multiples adj. for value of key ventures/investments; For ICICI Bank and HDFC Ltd BV is adjusted for investments in subsidiaries 3 February

11 Financials and valuations Income Statement (INR Million) Y/E March E 2016E 2017E Interest Income 214, , , , , , , ,780 Interest Expense 129, , , , , , , ,734 Net Interest Income 84, , , , , , , ,046 Change (%) Non Interest Income 36,101 36,126 42,026 42,234 45,767 55,726 62,903 70,403 Net Income 120, , , , , , , ,448 Change (%) Operating Expenses 47,619 63,642 70,028 81,651 93, , , ,470 Pre Provision Profits 73,263 90, , , , , , ,978 Change (%) Provisions (excl tax) 14,215 24,920 35,772 43,856 66,939 59,533 69,787 74,275 PBT 59,048 65,637 70,370 65,218 46,905 62,061 74, ,703 Tax 19,994 21,302 21,528 17,741 13,479 24,825 24,197 32,728 Tax Rate (%) PAT 39,054 44,335 48,842 47,477 33,426 37,237 50,256 67,975 Change (%) Equity Dividend (Incl tax) 8,101 8,101 8,672 11,166 4,236 4,338 5,855 7,919 Core PPP* 62,069 82,432 97,584 99, , , , ,578 Change (%) *Core PPP is (NII+Fee income-opex) Balance Sheet (INR Million) Y/E March E 2016E 2017E Share Capital 3,153 3,168 3,392 3,535 3,621 3,621 3,621 3,621 Equity Share Capital 3,153 3,168 3,392 3,535 3,621 3,621 3,621 3,621 Reserves & Surplus 174, , , , , , , ,894 Net Worth 177, , , , , , , ,515 Deposits 2,493,298 3,128,987 3,795,885 3,915,601 4,513,967 5,033,074 5,838,366 6,772,504 Change (%) of which CASA Dep 1,018,500 1,203,250 1,341,293 1,533,443 1,728,721 1,866,250 2,146,187 2,468,116 Change (%) Borrowings 192, , , , , , , ,797 Other Liabilities & Prov. 103, , , , , , , ,413 Total Liabilities 2,966,328 3,783,252 4,581,923 4,789,477 5,504,199 5,994,966 6,904,398 7,956,229 Current Assets 234, , , , , , , ,297 Investments 777, ,623 1,227,030 1,298,962 1,437,855 1,509,748 1,736,210 1,996,641 Change (%) Loans 1,866,012 2,421,067 2,937,748 3,087,959 3,492,691 3,911,814 4,498,586 5,218,360 Change (%) Fixed Assets 25,135 31,056 31,689 33,577 34,197 35,174 36,150 37,126 Other Assets 63,201 82,594 97,177 97,626 87, , , ,804 Total Assets 2,966,328 3,783,252 4,581,923 4,789,477 5,504,199 5,994,966 6,904,398 7,956,229 Asset Quality (%) GNPA (INR m) 32,144 43,794 87, , , , , ,748 NNPA (INR m) 9,817 20,386 44,542 72,365 99, , , ,065 GNPA Ratio NNPA Ratio PCR (Excl Tech. write off) PCR (Incl Tech. Write off) E: MOSL Estimates 3 February

12 Financials and valuations Ratios Y/E March E 2016E 2017E Spreads Analysis (%) Avg. Yield-Earning Assets Avg. Yield on loans Avg. Yield on Investments Avg. Cost-Int. Bear. Liab Avg. Cost of Deposits Interest Spread Net Interest Margin Profitability Ratios (%) RoE RoA Int. Expense/Int.Income Fee Income/Net Income Non Int. Inc./Net Income Efficiency Ratios (%) Cost/Income* Empl. Cost/Op. Exps Busi. per Empl. (INR m) NP per Empl. (INR lac) * ex treasury Asset-Liability Profile (%) Loans/Deposit Ratio CASA Ratio Investment/Deposit Ratio G-Sec/Investment Ratio CAR Tier Valuation Book Value (INR) Change (%) Price-BV (x) Adjusted BV (INR) Price-ABV (x) EPS (INR) Change (%) Price-Earnings (x) Dividend Per Share (INR) Dividend Yield (%) E: MOSL Estimates 3 February

13 N O T E S 3 February

14 Disclosures Punjab National Bank This document has been prepared by Motilal Oswal Securities Limited (hereinafter referred to as Most) to provide information about the company(ies) and/sector(s), if any, covered in the report and may be distributed by it and/or its affiliated company(ies). This report is for personal information of the selected recipient/s and does not construe to be any investment, legal or taxation advice to you. This research report does not constitute an offer, invitation or inducement to invest in securities or other investments and Motilal Oswal Securities Limited (hereinafter referred as MOSt) is not soliciting any action based upon it. This report is not for public distribution and has been furnished to you solely for your general information and should not be reproduced or redistributed to any other person in any form. This report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any advice or recommendation in this material, investors should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the investments referred to in this material and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur. MOSt and its affiliates are a full-service, integrated investment banking, investment management, brokerage and financing group. We and our affiliates have investment banking and other business relationships with a some companies covered by our Research Department. Our research professionals may provide input into our investment banking and other business selection processes. Investors should assume that MOSt and/or its affiliates are seeking or will seek investment banking or other business from the company or companies that are the subject of this material and that the research professionals who were involved in preparing this material may educate investors on investments in such business. The research professionals responsible for the preparation of this document may interact with trading desk personnel, sales personnel and other parties for the purpose of gathering, applying and interpreting information. Our research professionals are paid on the profitability of MOSt which may include earnings from investment banking and other business. MOSt generally prohibits its analysts, persons reporting to analysts, and members of their households from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. Additionally, MOSt generally prohibits its analysts and persons reporting to analysts from serving as an officer, director, or advisory board member of any companies that the analysts cover. Our salespeople, traders, and other professionals or affiliates may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all of the foregoing among other things, may give rise to real or potential conflicts of interest. MOSt and its affiliated company(ies), their directors and employees and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the affiliates of MOSt even though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report Reports based on technical and derivative analysis center on studying charts company's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamental analysis. In addition MOST has different business segments / Divisions with independent research separated by Chinese walls catering to different set of customers having various objectives, risk profiles, investment horizon, etc, and therefore may at times have different contrary views on stocks sectors and markets. Unauthorized disclosure, use, dissemination or copying (either whole or partial) of this information, is prohibited. The person accessing this information specifically agrees to exempt MOSt or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSt or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSt or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays. The information contained herein is based on publicly available data or other sources believed to be reliable. Any statements contained in this report attributed to a third party represent MOSt s interpretation of the data, information and/or opinions provided by that third party either publicly or through a subscription service, and such use and interpretation have not been reviewed by the third party. This Report is not intended to be a complete statement or summary of the securities, markets or developments referred to in the document. While we would endeavor to update the information herein on reasonable basis, MOSt and/or its affiliates are under no obligation to update the information. Also there may be regulatory, compliance, or other reasons that may prevent MOSt and/or its affiliates from doing so. MOSt or any of its affiliates or employees shall not be in any way responsible and liable for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. MOSt or any of its affiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement. The recipients of this report should rely on their own investigations. This report is intended for distribution to institutional investors. Recipients who are not institutional investors should seek advice of their independent financial advisor prior to taking any investment decision based on this report or for any necessary explanation of its contents. Most and it s associates may have managed or co-managed public offering of securities, may have received compensation for investment banking or merchant banking or brokerage services, may have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past 12 months. Most and it s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report. Subject Company may have been a client of Most or its associates during twelve months preceding the date of distribution of the research report MOSt and/or its affiliates and/or employees may have interests/positions, financial or otherwise of over 1 % at the end of the month immediately preceding the date of publication of the research in the securities mentioned in this report. To enhance transparency, MOSt has incorporated a Disclosure of Interest Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report. Motilal Oswal Securities Limited is under the process of seeking registration under SEBI (Research Analyst) Regulations, There are no material disciplinary action that been taken by any regulatory authority impacting equity research analysis activities Analyst Certification The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report. The research analysts, strategists, or research associates principally responsible for preparation of MOSt research receive compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues Disclosure of Interest Statement INDIAN BANK Analyst ownership of the stock No Served as an officer, director or employee No Regional Disclosures (outside India) This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject MOSt & its group companies to registration or licensing requirements within such jurisdictions. For U.S. Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement. The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account. For Singapore Motilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors Regulations and is a subsidiary of Motilal Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore to accredited investors, as defined in the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time. In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited: Anosh Koppikar Kadambari Balachandran anosh.koppikar@motilaloswal.com kadambari.balachandran@motilaloswal.com Contact : (+65) Contact : (+65) / Office Address : 21 (Suite 31),16 Collyer Quay,Singapore Motilal Oswal Securities Ltd 3 February 2015 Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai Phone: reports@motilaloswal.com