Canara Bank, Bank of Baroda among 7 bank stocks with up to 26% upside potential. Own any?

Domestic brokerage firm ICICI Securities has initiated coverage on seven public sector banks. The brokerage said the phase of strong earnings growth and return on assets (RoA) expansion for PSU banks appears to be losing momentum. Even so, it expects return on equity (RoE) to remain healthy at around 15% during FY27 and FY28, while noting that valuations for most PSU banks remain below their FY28 RoA, providing valuation comfort. Here’s the full list.

Indian Bank

ICICI Securities initiated coverage on Indian Bank (INBK) with Buy rating and a target of Rs 1,000, an upside of 19.5% from current levels. It pegged target multiple slightly higher than estimated RoA, due to its superior NIM/core PPOP and better positioning on ECL.

Bank of Maharashtra

With a Buy call, and a target of Rs 100, the brokerage initiated coverage with an implied upside of 26%. It likes the franchise strength (CASA, growth profile, net NPA and NIM/RoE profile) and current leadership, though it may have to focus on core fee and tech capabilities.

Union Bank of India

ICICI Securities initiates coverage on Union Bank of India with Buy rating and target of Rs 210 (21%upside) pegging the target multiple similar to estimated RoA. The bank has a relatively lower NIM due to subdued CASA and interest on IT refund being accounted for in other income.

Punjab National Bank

ICICI Securities initiated coverage on PNB with Add rating and target of Rs 125 (11% upside). The target multiple is lower than estimated RoA due to relatively subdued core PPOP and near-term growth profile. While it envisages healthy asset quality ahead, ICICI believes credit cost is unlikely to be an RoA lever, underpinning its ~0.9% RoA estimates.

Bank of India

ICICI Securities initiated coverage with an Add rating and target price of Rs 155 (11.5% upside). The brokerage assigned a lower target multiple than the bank's projected return on assets (RoA), citing its weak core pre provision operating profit (PPOP) to RoA profile and the likelihood of a higher expected credit loss (ECL) impact. While ICICI Securities has factored in healthy loan growth and net interest margins (NIM), it expects the bank's RoA to remain below 1% in FY27.

Canara Bank

ICICI Securities initiated coverage on the lender with an Add rating and a target of Rs 140 (10.2% upside). The brokerage assigned a target multiple in line with its estimated return on assets (RoA). It said the bank stands out due to its large 20% share of gold loans, which contributes more than 400 basis points to overall loan growth, supports priority sector lending certificate (PSLC) fee income, enhances financial leverage and return on equity (RoE), and helps keep agricultural NPAs under control.

Bank of Baroda

ICICI Securities initiated coverage with an Add rating and target price of Rs 275 (11.33% upside). The brokerage assigned a target multiple that is slightly lower than its estimated return on assets (RoA), citing the bank's relatively weaker core pre provision operating profit (PPOP) and a more volatile growth profile.