PNB becomes the third public sector bank to have one lakh crore market cap

Punjab National Bank (PNB) became the third public sector bank to achieve the ₹1 lakh crore milestone on Friday, December 15, even as the stock price is yet to reach its all-time high. This achievement is attributed to the massive equity infusion observed by banks, including PNB, in the past.

For instance, the total outstanding shares of PNB have increased over sixfold since FY13 to the current 1101 crore. 

Shares of PNB added another 2% on Friday, closing the session at ₹91.25 on NSE. In fact, the stock of PNB is trading at about 67% lower to its record high of ₹279.98, that it hit on November 09, 2010.

The operating profit of most state-owned banks have improved over the last two years. “In last two years, banking system has grown at a fairly fast Pace,” said Karthik Srinivasan, Senior Vice President of ICRA.

However, the recent rally in PNB stock has also taken its valuation multiple to an expensive territory. According to Bloomberg data, PNB shares are trading at 0.94 times of its one-year forward book, which is 76% premium to its five-year average.

Further, many in the street have turned more cautious post sudden surge in PSU banks space, especially smaller ones. They believe that the price-to-book value (P/BV) ratio doesn’t justify buying into smaller PSU banks.