Motilal Oswal Financial Services (MOSL) said public sector banks (PSBs) are in a strong position to sustain return on assets (RoA) at around 1% over the medium term, supported by healthy liquidity and a strong funding profile. The brokerage believes PSBs will continue to deliver stable credit growth, while their credit market share erosion will be milder than the 200 basis points annual decline seen in the past.
MOSL noted that PSBs are navigating net interest margin pressures through strategic rebalancing, and the pace of margin compression is expected to ease. Bond gains are also providing crucial earnings support, with other income now forming between 22–40% of total income.
Within the PSU banking space, MOSL’s top picks are State Bank of India (SBI) and Punjab National Bank (PNB), while Indian Bank (INBK) stands out among mid-sized lenders. The brokerage maintained a neutral stance on Bank of Baroda (BoB) and Union Bank of India (UNBK).
Disclaimer: The views and recommendations made in this article are those of Motilal Oswal Financial Services. This article does not constitute investment advice. Investors should consult their financial advisors before making any investment decisions.
