Motilal Oswal Lists 5 Public Sector Bank Stocks With Buy Rating, Sees Upto 50% Return

Motilal Oswal in its March 2023 Result Preview report on Financial: Banks & Insurance sector report list 5 leading Public Sector Banks (PSBs) namely Bank of Baroda, Canara Bank, Indian Bank, State Bank of India, and Union Bank of India with "Buy" rating. The brokerage sees a potential upside of up to 50% from the stocks' current level if purchased at the current market price. Below are key highlights:

Bank of Baroda (BoB)

Motilal Oswal assigns "Buy" on BoB with a target price of Rs 240/share, claiming a potential upside of 44%. Currently, the stock is trading at Rs 167.15/share. It has given 43.97% positive return in 1 year, 242.92% in 3 years and 12.99% in 5 years, respectively.

According to Motilal Oswal, Expect earnings and business growth to see healthy traction. Expect slippages to moderate and asset quality to improve further; credit cost likely to remain stable. Opex trajectory, particularly employee costs, is a key focus area due to wage revision costs. Traction in deposits, cost of deposits and margin trajectory to be key monitorable.

Canara Bank

The brokerage estimates a target price of Rs 400/share for the stock, assigns a "Buy" call. It claims a potential upside of 41%. The stock is currently trading at Rs 285.20/share. It has given 17% positive return in 1 year, 237.79% in 3 years and 0.41% in 5 years, respectively.

According to Motilal Oswal, Expect business growth to remain steady. Expect asset quality and slippages to moderate. Credit costs to stay elevated; restructuring book a key monitorable. Expect margin to remain stable at ~3.1%; opex, traction in deposits and movement in cost of deposits to be key.

Indian Bank

The brokerage recommends "Buy" on Indian Bank, sees 15% potential upside with a target price of Rs. 340/share. Currently, the stock is trading at Rs 295.95/share. It has given 78.35% positive return in 1 year and 546.32% in 3 years, respectively, However, in 5 years, it gave 8.75% negative return.

According to Motilal Oswal, Expect loan growth to remain modest. Stress in SME and restructuring book to be monitored. Expect margin to improve to ~3.8%; traction in deposits and rise opex and cost of deposits to be key monitorable. Expect asset quality to improve and credit costs to witness a gradual moderation.

State Bank of India (SBI)

Motilal Oswal assigns "buy" on SBI with Rs 700/share target price, claims upto 34% return if purchased at the current market price. The stock is currently trading at Rs 525.45/share. It gave 2.67% positive return in 1 year, 198.01% in 3 years, and 101.7% in 5 years, respectively.

According to Motilal Oswal, Expect credit costs to remain modest. Expect asset quality to continue to improve. Expect healthy traction in loan growth; all eyes on outlook. Expect margin to improve to ~3.6%; opex, traction in deposits, and increase in deposit costs to be key monitorables.

Union Bank of India

The brokerage assigns "Buy" on UBI with a target price of Rs 100/share, sees potential gains of up to 50%. The stock is currently trading at Rs 67/share. It has given 55.07% positive return in 1 year, and 135.31% in 3 years, respectively. However, in 5 years, it gave 32.93% negative return.

According to Motilal Oswal, Expect steady traction in loan growth; traction in deposits to be key monitorable. Expect margin to remain healthy at 3.3%; rise in deposit costs and opex to be monitored. SMA and restructuring books are key monitorables. Expect steady improvement in asset quality.

Disclaimer - The stocks have been picked from the brokerage report of Motilal Oswal. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.