ICICI Securities initiates coverage on 7 PSU banks with positive valuations

Domestic brokerage ICICI Securities has initiated coverage on seven PSU banks, assigning a ‘Buy’ rating to Indian Bank, Union Bank of India, Bank of Maharashtra, Canara Bank, Bank of Baroda (BoB), Bank of India and Punjab National Bank (PNB). The brokerage has also resumed coverage on SBI with a ‘Buy’ rating.

The brokerage has stated in its report that PSB’s phase of strong earnings growth and RoA acceleration seems to be losing steam, with ebbing tailwinds from excess liquidity and recoveries. Despite RoA moderation, it estimates RoE to be healthy at ~15% for FY27-28, while valuations below FY28 RoA for most PSBs provide comfort.

The brokerage maintains a positive stance on the banking sector, and estimates a healthy loans CAGR of ~14-15% for FY26–28.


NII growth has risen to double-digit and should accelerate further due to broadly stable NIM, as per ICICI Securities, and asset quality is likely to hold steady. It also warns of oil, currency, and climate-related disturbances.

Indian Bank

ICICI Securities has initiated coverage on Indian Bank with a Buy rating, pegging their target multiple slightly higher than estimated RoA, due to its superior NIM/core PPOP and better positioning on ECL. Indian Bank is among the few PSBs with rule-based standard provisioning on SMA 1+2 loans. Despite modelling for lower recoveries, the brokerage estimates stable RoA (1.3%) for FY27–28, aided by benign credit costs and superior PPOP.

Bank of Maharashtra

The brokerage has given coverage on Bank of Maharashtra with a Buy rating, as the bank towers both private and PSU Banks peers with ~50% CASA, amongst the lowest cost of deposits (CoD), superior loan growth, 99% PCR including TWO, <15bps NNPA and 24% RoE. The brokerage finds confidence in the franchise strength (CASA, growth profile, net NPA and NIM/RoE profile) and current leadership, but believes that the bank may have to focus on core fee and tech capabilities.

Union Bank of India

The brokerage has initiated coverage on Union Bank of India with a Buy rating, pegging the target multiple similar to the estimated RoA. The bank has a relatively lower NIM due to subdued CASA and interest on IT refund being accounted for in other income. The bank has superior core/headline RoA and seems well poised for growth acceleration under the incumbent MD&CEO, ICICI Securities stated in its report.

Punjab National Bank

ICICI Securities initiated coverage on PNB with an ADD rating. The target multiple is lower than the estimated RoA due to a relatively subdued core PPOP and a near-term growth profile, the brokerage revealed in its report. The brokerage expects the bank to have healthy asset quality ahead, but believes credit cost is unlikely to be an RoA lever, thereby underpinning ~0.9% RoA estimates by the brokerage.

Bank of India

The brokerage has initiated coverage on Bank of India with an ADD rating. The target multiple is lower than projected RoA, given the bank’s weak core PPOP/RoA, alongside a potentially higher ECL impact, as per ICICI Securities’ report. Despite building in healthy loan / NIM, the brokerage estimates RoA at <1% for FY27/28 due to moderating recoveries and higher credit costs.

Canara Bank

The brokerage has initiated coverage on Canara Bank with ADD rating. The target multiple is similar to the estimated RoA. Canara Bank stands out with its huge (20%) share of gold loans, which drives the bank’s overall growth (>400bps differential due to gold loans), aids PSLC fee, and boosts financial leverage/RoE while keeping agri NPA in check. The lender has one of the lowest CASA ratios and thus is more sensitive to bulk rates.

Bank of Baroda

The brokerage has initiated coverage on Bank of Baroda with an ADD rating. The target multiple is slightly lower than the estimated RoA due to relatively lower core PPOP and a volatile growth profile. Bank of Baroda has one of the lowest retail / agri slippages, though overseas stress remains volatile. The lender has lower reliance on TWO recoveries and treasury, but core fee income growth has been relatively subdued. Excluding one-time hits about overseas exposure, the brokerage expects RoA at ~0.9% for FY28E.