BoFA Securities has revised its price targets for two leading public sector banks in India, Union Bank of India and Canara Bank, following their robust September quarter earnings. The brokerage firm has set a new target for Union Bank at ₹140, up from ₹130, and for Canara Bank at ₹490, up from ₹455. These revisions suggest potential gains of approximately 34% for Union Bank and 25% for Canara Bank, with both institutions receiving a 'buy' recommendation.
The NIFTY PSB index, which includes these banks, has recently outperformed the broader NIFTY Banks index by rising 11%. This bullish sentiment is underpinned by Canara Bank's impressive financial performance, with its net profit climbing to ₹3,606 crore, marking a year-on-year increase of nearly 43%. The bank's net interest income (NII) grew to ₹8,903 crore, accompanied by an improved net interest margin (NIM) of 3.02%. Additionally, Canara Bank has achieved cost efficiency with its cost-to-income ratio falling below forty-four percent.
Union Bank also reported significant growth with a 90% surge in net profit year-on-year, reaching ₹3,511.4 crore. Its NII saw a 10% increase compared to the previous year. In early trading today, shares of Canara Bank were trading at around ₹394.85, while Union Bank's shares stood at ₹107.60.
BoFA Securities highlights the strong earnings potential and attractive valuations of these banks, with an analysis indicating a price-to-book (P/B) ratio of 0.7x for the fiscal year 2025 estimates (FY25E). This positive outlook is reflected in the upward revision of the target prices for both banks as investors respond to their financial improvements and growth prospects.
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