UBS has initiated coverage on select public sector banks with a mixed view, assigning a buy rating on Canara Bank with a target price of ₹150 per share, while initiating neutral ratings on Union Bank of India and Punjab National Bank (PNB), both with target prices of ₹150 and ₹120, respectively.
The brokerage said the overall sector risk-reward appears neutral at current valuations, with limited scope for broad-based re-rating across the PSU banking pack. UBS noted that while the growth outlook for state-run lenders remains modest, margin pressures are expected to be relatively contained compared to the private sector, supported by strong liability franchises and gradual improvement in asset quality.
However, UBS cautioned that the rise in credit costs, although controlled, coupled with a lower core pre-provision operating profit (PPoP), leaves less cushion for sustained improvement in return on assets (RoAs). The brokerage therefore prefers banks with clearer growth visibility and stronger balance sheet momentum, identifying Canara Bank as its preferred pick among PSBs.
Disclaimer: The views and recommendations above are those of UBS. Business Upturn does not endorse them. Please consult a financial advisor before making investment decisions.
