Shares of state-owned Punjab National Bank (PNB) rose 2% in morning trade on substantial trading volume and a healthy outlook on Tuesday, January 3. The stock opened at Rs 57.45 per share on the NSE and hit an intraday high as buying momentum picked up at Rs 58.30.

Shares of the public sector bank have risen 8% in the past five sessions and more than 90% in the past six months.

Given the strong outlook, domestic brokerage Sharekhan maintained a “buy” rating. It said the bank is likely to deliver strong earnings, supported by faster loan growth, higher margins and normalized credit costs, and a healthy increase in pre-provision operating profit (PPOP).

The report said PNB’s valuation is cheap compared to expected future return improvements. The bank is likely to post strong earnings growth, better earnings growth, and higher RoA/RoE led by healthy loan growth, margin improvement and lower credit costs.

Sharekhan also said PNB’s balance sheet had been strengthened. It has a healthy current account savings account (CASA) share and higher liquidity. It added that system loan growth was strong at 16-17%, while the bank expects credit growth of 12-14% in FY23.

“The outlook for asset quality remains strong. Low slippage formation and a healthy recovery will likely improve asset quality further. With loan growth accelerating and a stable margin outlook, PPoP growth should improve,” it said.

In his note, Sharekhan said that any correction in the stock is an excellent opportunity to add to its holdings due to an improving business outlook.

It maintained its buy call on PNB with an unchanged target price of Rs 64.

Sharekhan said PSU banks became more robust after the COVID crisis. Looking ahead to PNB, the recovery will outpace new NPA growth, and the existing strong recovery trend will likely continue.