Broker's call: Espirito retains sell on PNB

Espirito Santo has maintained its ‘ Sell’ rating on Punjab National Bank and set a target price of. Rs701. Despite trading at seemingly attractive multiples, it remained a seller of PNB as it thinks it is entering into a prolonged deterioration in asset quality.

This is the direct result of its lengthy high phase during FY06-11 when it grew at a rapid pace in riskier sectors.

This, together with the fact that its CASA franchise deteriorated by more than 1,300bps during the same period, means it will have little P&L manoeuvrability to absorb higher provisioning.