Derivatives and Quantitative Strategist

Gaudenz Schneider

Equity Bottom-Up

<ul>
<li>
Context: This article provides an update on a previously identified pair trading opportunity between <a href="https://www.smartkarma.com/entities/punjab-national-bank" target="_blank" data-smartkarma-citation="entities:542:1" rel="noopener">Punjab National Bank (PNB IN)</a> and <a href="https://www.smartkarma.com/entities/canara-bank" target="_blank" data-smartkarma-citation="entities:543:1" rel="noopener">Canara Bank (CBK IN)</a>, based on statistical mean reversion analysis.</li>
<li>
Key Insights: The trade has now reached its exit signal as the price ratio reverted to its one-standard deviation band, yielding a positive return.</li>
<li>
Why Read It: For investors interested in quantitative trading strategies, this article demonstrates how statistical arbitrage can generate short-term alpha and highlights actionable similar opportunities in the current market.</li>
</ul>



Context: This article provides an update on a previously identified pair trading opportunity between Punjab National Bank (PNB IN) and Canara Bank (CBK IN), based on statistical mean reversion analysis.

Key Insights: The trade has now reached its exit signal as the price ratio reverted to its one-standard deviation band, yielding a positive return.

Why Read It: For investors interested in quantitative trading strategies, this article demonstrates how statistical arbitrage can generate short-term alpha and highlights actionable similar opportunities in the current market.


Canara Bank (CBK IN) Vs. Punjab National Bank (PNB IN): Positive Outcome as Pair Reverts to Mean

<ul>
<li>The <a href="https://www.smartkarma.com/entities/canara-bank" target="_blank" data-smartkarma-citation="entities:543:1" rel="noopener">Canara Bank (CBK IN)</a> vs. <a href="https://www.smartkarma.com/entities/punjab-national-bank" target="_blank" data-smartkarma-citation="entities:542:1" rel="noopener">Punjab National Bank (PNB IN)</a> price-ratio has deviated more than two standard deviations from its one-year average, presenting a potential relative value opportunity.</li>
<li>The relative value opportunity has a target return of approximately 6% and can be implemented through stocks, derivatives, or as relative over-/underweights in a long only context.</li>
<li>Trade setup, statistical properties, factor exposure, risk management strategies, and key events are discussed.</li>
</ul>


The Canara Bank (CBK IN) vs. Punjab National Bank (PNB IN) price-ratio has deviated more than two standard deviations from its one-year average, presenting a potential relative value opportunity.
The relative value opportunity has a target return of approximately 6% and can be implemented through stocks, derivatives, or as relative over-/underweights in a long only context.
Trade setup, statistical properties, factor exposure, risk management strategies, and key events are discussed.


Canara Bank (CBK IN) Vs. Punjab National Bank (PNB IN): A Relative Value Opportunity

Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Financials & FinTech research

Financials & FinTech, EM & Developed Markets

Galliano’s Financials Research

Galliano's Financials Research provides fundamental research in Emerging Markets financials, including FinTech, as well as financials in select Developed Markets.

The investment style applied is generally value oriented, although Growth At Reasonable Price (GARP) strategies can also be used where appropriate. 

Our investment research approach aim is often contrarian, looking to capitalise on overly sceptical or optimistic consensus views. In terms of valuation techniques, the focus is on PBV ratio to ROE, PE multiples and dividend yield, as well as the application of PEG ratios and, where appropriate, Sum of the Parts (SOTP) valuations.

<ul>
<li>We recommend three smaller cap Indian banks, namely Baroda, Bandhan adding Punjab National Bank (PNB); we remove Union Bank of India from the buy list, PNB is more compelling</li>
<li>Bandhan and Baroda are attractive for their value attributes relative to their returns, with newly added PNB delivering better returns and it continues to improve credit quality</li>
<li>Richly valued Kotak Mahindra has the group’s highest returns post credit costs, but returns continue to trend downwards; we upgrade premium-valued ICICI to neutral as it delivers further improved returns</li>
</ul>


We recommend three smaller cap Indian banks, namely Baroda, Bandhan adding Punjab National Bank (PNB); we remove Union Bank of India from the buy list, PNB is more compelling
Bandhan and Baroda are attractive for their value attributes relative to their returns, with newly added PNB delivering better returns and it continues to improve credit quality
Richly valued Kotak Mahindra has the group’s highest returns post credit costs, but returns continue to trend downwards; we upgrade premium-valued ICICI to neutral as it delivers further improved returns


Indian Banks Screener: Adding Punjab National Bank (NSEI:PNB) To the Buy List

External broker reports(aggregated public sources), Motilal Oswal Financial Services Limited

Motilal Oswal

External broker reports(aggregated public sources)

Motilal Oswal Financial Services Limited

Motilal Oswal Financial Services Limited is an Indian diversified financial services firm offering a range of financial products and services. 

Content available is external broker reports authored by a third party outside the Smartkarma network and has been aggregated by an online aggregator through publicly available sources and is displayed by Smartkarma in this format for user's convenience and general informational purposes only. Content does not constitute investment or financial advice and Smartkarma makes no representation or warranty regarding its accuracy or contents. Original third party author retains all copyright and other proprietary rights in the content. Access or use of third party links not controlled by Smartkarma are at the user's own risk.

<ul><li>Punjab National Bank (PNB) reported a healthy 3QFY25 PAT of INR45.1b (103% YoY growth, 24% beat), primarily driven by provisioning reversal.</li><li>NII grew 7% YoY/5% QoQ to INR110.3b (in line), while NIM inched up 1bp QoQ to 2.93% (3.09% domestic NIMs).</li><li>Loan book grew 16.8% YoY (4.9% QoQ) to INR10.7t, led by continued traction in retail loans, up 22.6% YoY/5.0% QoQ.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Punjab National Bank (PNB) reported a healthy 3QFY25 PAT of INR45.1b (103% YoY growth, 24% beat), primarily driven by provisioning reversal.NII grew 7% YoY/5% QoQ to INR110.3b (in line), while NIM inched up 1bp QoQ to 2.93% (3.09% domestic NIMs).Loan book grew 16.8% YoY (4.9% QoQ) to INR10.7t, led by continued traction in retail loans, up 22.6% YoY/5.0% QoQ.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Punjab National Bank - Strong Quarter; Asset Quality Continues to Improve

External broker reports(aggregated public sources), Sharekhan

Sharekhan

Sharekhan is India's leading broking house providing services from easy online trading, research to wide array of financial products. 

Content available is external broker reports authored by a third party outside the Smartkarma network and has been aggregated by an online aggregator through publicly available sources and is displayed by Smartkarma in this format for user's convenience and general informational purposes only. Content does not constitute investment or financial advice and Smartkarma makes no representation or warranty regarding its accuracy or contents. Original third party author retains all copyright and other proprietary rights in the content. Access or use of third party links not controlled by Smartkarma are at the user's own risk.

<ul><li>PAT at Rs. 4,508 crore beat estimates, up 103% y-o-y mainly aided by write-back of provisions resulting in steady state RoA at 1.0%.</li><li>Asset quality continued to improve. However, operating profit growth was muted (up 5% y-o-y) led by lower recoveries from NPA pool and AS-15 related provisions despite strong loan growth (~17% y-o-y).</li><li>NIMs were stable q-o-q at 2.93%. The bank guided that NPA recoveries would drive earnings/ return ratios over the next few quarters as the overall written off pool is quite large at ~Rs 91,000 crore.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

PAT at Rs. 4,508 crore beat estimates, up 103% y-o-y mainly aided by write-back of provisions resulting in steady state RoA at 1.0%.Asset quality continued to improve. However, operating profit growth was muted (up 5% y-o-y) led by lower recoveries from NPA pool and AS-15 related provisions despite strong loan growth (~17% y-o-y).NIMs were stable q-o-q at 2.93%. The bank guided that NPA recoveries would drive earnings/ return ratios over the next few quarters as the overall written off pool is quite large at ~Rs 91,000 crore.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Punjab National Bank - Provision Write-Back Drives Q3

India

Punjab National Bank provides financial services such as corporate and personal banking, industrial finance, agricultural finance, financing of trade and international banking. The Company provides services to domestic conglomerates, medium and small industrial units, exporters, non-resident Indians and multinational companies.

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Punjab National Bank (PNB IN)

Canara Bank (CBK IN) Vs. Punjab National Bank (PNB IN): Positive Outcome as Pair Reverts to Mean

Pair trading opportunity between Punjab National Bank and Canara Bank has reached exit signal with positive return, demonstrating how statistical...

Gaudenz Schneider

Canara Bank (CBK IN) Vs. Punjab National Bank (PNB IN): A Relative Value Opportunity

Deviation in Canara Bank vs. Punjab National Bank price-ratio presents a potential relative value opportunity. Target return, historical...

Gaudenz Schneider

Indian Banks Screener: Adding Punjab National Bank (NSEI:PNB) To the Buy List

Buy Baroda, Bandhan, and PNB, the latter replacing UBI. PNB offers sharply improving returns, all are value plays. Richly valued Kotak Mahindra is...

Victor Galliano

Punjab National Bank - Strong Quarter; Asset Quality Continues to Improve

Punjab National Bank (PNB) reported a healthy 3QFY25 PAT of INR45.1b (103% YoY growth, 24% beat), primarily driven by provisioning reversal.

Motilal Oswal

Punjab National Bank - Provision Write-Back Drives Q3

PAT at Rs. 4,508 crore beat estimates, up 103% y-o-y mainly aided by write-back of provisions resulting in steady state RoA at 1.0%.

Sharekhan

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Canara Bank (CBK IN) Vs. Punjab National Bank (PNB IN): Positive Outcome as Pair Reverts to Mean

Pair trading opportunity between Punjab National Bank and Canara Bank has reached exit signal with positive return, demonstrating how statistical...

Gaudenz Schneider

Canara Bank (CBK IN) Vs. Punjab National Bank (PNB IN): A Relative Value Opportunity

​Deviation in Canara Bank vs. Punjab National Bank price-ratio presents a potential relative value opportunity. Target return, historical...

Gaudenz Schneider

Indian Banks Screener: Adding Punjab National Bank (NSEI:PNB) To the Buy List

​Buy Baroda, Bandhan, and PNB, the latter replacing UBI. PNB offers sharply improving returns, all are value plays. Richly valued Kotak Mahindra is...

Victor Galliano

Punjab National Bank - Strong Quarter; Asset Quality Continues to Improve

Punjab National Bank (PNB) reported a healthy 3QFY25 PAT of INR45.1b (103% YoY growth, 24% beat), primarily driven by provisioning reversal.

Motilal Oswal

Punjab National Bank - Provision Write-Back Drives Q3

PAT at Rs. 4,508 crore beat estimates, up 103% y-o-y mainly aided by write-back of provisions resulting in steady state RoA at 1.0%.

Sharekhan

Deviation in Canara Bank vs. Punjab National Bank price-ratio presents a potential relative value opportunity. Target return, historical...

Buy Baroda, Bandhan, and PNB, the latter replacing UBI. PNB offers sharply improving returns, all are value plays. Richly valued Kotak Mahindra is...