Nifty PSU Bank index rallied 3 per cent on the National Stock Exchange (NSE) in Tuesday’s intra-day trade after Bank of Baroda (BoB) reported strong business growth.
Additionally, the PSU lender giant, State Bank of India (SBI) is likely to raise $2 billion funds via offshore bonds. As per exchange filings, SBI said its board will meet on April 18 to consider the same. Last month, SBI had raised Rs 3,717 crore through AT 1 bond sale at a coupon rate of around 8.25 per cent.
Among the individual stocks, Punjab & Sind Bank surged 7 per cent, while Uco Bank, Union Bank of India and Bank of Baroda rallied 4 per cent, followed by Central Bank of India, Indian Overseas Bank, Canara Bank and Bank of Maharashtra, which were up 3 per cent each. SBI, Indian Bank, Bank of India and Punjab National Bank were up 2 per cent each.
In January-March quarter (Q4FY23), analysts at ICICI Securities expect earnings momentum to continue to remain strong led by continued robust credit offtake, steady elevated margins on the back of yield repricing offsetting higher cost of deposit and steady slippages and resolutions of few stressed assets leading to stable credit cost.
The operational performance is expected to remain positive across lenders. PSU banks are seen delivering continued strong earning trajectory. Management commentary on segments to drive advance growth, liabilities accretion while margin trajectory amid rising cost of funds will be keenly watched, the brokerage firm said in result preview.
Which PSU Bank Stocks Should You Invest In?
Ahead of Q4 results, domestic brokerage firm Motilal Oswal has selected a few PSU Bank stocks which have the strength to deliver good returns. The brokerage firm believes that stocks like Canara Bank, Bank of Baroda and SBI will provide good opportunities to investors.
Indian Bank
Domestic brokerage firm Motilal Oswal has a buy rating on Indian Bank with a target price of Rs 340, which shows an upside potential of 20% from the current market prices.
The brokerage firm expects the bank’s loan growth to remain modest in Q4. Stress in SME and restructuring book to be monitored, it said.
Bank of Baroda
Brokerage firm Motilal has a Buy recommendation on Bank of Baroda with a target price of Rs 240, which signals an upside potential of 45% from the current market price.
Motilal Oswal has a Buy call on SBI with a target price of Rs 700, which indicates an upside potential of 33% from the current market prices.
Union Bank of India
Brokerage firm Motilal Oswal has a Buy rating on Union Bank of India with a target price of Rs 100, which signals an upside potential of 49% from the current market prices.
Canara Bank
Motilal Oswal has a buy call on Canara Bank with a target price of Rs 400, which implies an upside potential of 41% from the current market prices.
“Expect business growth to remain steady, while asset quality and slippages to moderate. Expect margin to remain stable at ~3.1%; opex, traction in deposits and movement in the cost of deposits to be key,” the brokerage firm said.
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