Stocks To Buy: 3 PSU Bank Stocks That Have Become Investor Favourite

Is the tide finally turning for government banking stocks? It looks like given the solid quarterly numbers posted by State Bank of India, Bank of Baroda, Union Bank of India, Canara Bank and Indian Bank. In fact, private sector banking stocks have kind of stagnated, while government banking stocks are seeing a momentum.

Turning tide for banking stocks

On Monday, we had a carnage in some private financial banking stocks, including HDFC Bank and Kotak Mahindra Bank. Interestingly, on this day the stocks of both SBI and Bank of Baroda saw a strong performance, with both the stocks gaining.

It's the results that have led to belief that some of these stocks are undervalued and under owned and now need a second look.

Quarterly numbers very encouraging

The quarterly numbers of Bank of Baroda, State Bank of India, Indian Bank and Canara Bank were all pretty good. Canara Bank saw its net profits more than double to Rs 1502 crores in the quarter ending December 31, 2021 as against Rs 696 crores in the corresponding period of last year.

Indian Bank on the other hand saw its net profits rise 34% to Rs 690 crores. State Bank of India saw a 62% jump in its net profits for the quarter ending Dec 31, 2021 and Bank of Baroda saw its net profits double to Rs 2197 crores.

All in all it is a stupendous set of results for the government owned banks.

3 government banking stocks that you can buy now

While all of the bank have reported good quarterly numbers, brokerages have set significantly higher targets for Bank of Baroda, Union Bank of India and State Bank of India.

Broking firm, Motilal Oswal has set a 37% higher target on the stock of Union Bank of India. "The management indicated asset quality would continue to improve, aided by moderation in the slippage trend and higher recoveries from the resolution of stressed assets. Thus, this would continue to drive decline in net NPA to 2.2% by FY23E. We estimate credit costs at 1.8%/1.6% for FY23/FY24 and RoA/RoE at 0.8%/14% by FY24E. We maintain Buy on Union Bank of India stock, with target price of Rs 65 (0.7x FY24E ABV)," the brokerage has said.

Buy Bank of Baroda shares

Several firms have upped their target on Bank of Baroda shares. Kotak Institutional Equities sees the fair value at Rs 125, while Motilal Oswal has set a target of Rs 150 on the stock, implying a significant upside from current levels of Rs 114.

Almost all brokerages doing an analysis on the SBI stock also have a buy on the country's largest lender.

All in all, PSU or government banking stocks are in a sweet spot, however, price targets by brokerages are higher on Union Bank of India, Bank of Baroda and State Bank of India stock.

Disclaimer

Investing in equities is risky and investors must therefore understand the risk. The author and Greynium Information Technologies Pvt Ltd would not be responsible for any losses caused based on the article. The author and his family do not hold shares in any of the companies listed above.