Citi bullish on Bank of Baroda stock, sees 11% upside; downgrades SBI, PNB to 'sell'

So far this year, shares of BoB, SBI, and PNB have surged up to 24 percent, as against flat-to-positive move in the benchmark Sensex

Global brokerage firm Citi has shared a 'buy' call for Bank of Baroda (BoB) stock with a target price of Rs 290 per share (up 11 percent from last close), but stuck to 'sell' ratings for State Bank of India (SBI) and Punjab National Bank (PNB) with target prices of Rs 600 per share and Rs 83 per share, respectively.

Stock prices of BoB, SBI, and PNB declined up to 1 percent on February 29 following weak market sentiment on the day of monthly F&O expiry. But, so far this year, shares of BoB, SBI, and PNB have surged up to 24 percent, as against flat-to-positive move in the benchmark Sensex.

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Though the growth revival lags throughout the industry, Citi analysts believe that liquidity deposit ratios (LDRs) have expanded by 8-12 percent to 73-80 percent. Additionally, gross non-performing assets (GNPAs) or slippages have more-than-halved as credit cost rose over 2 percent.

"The yield improvement has outpaced deposit cost rise as net interest margins remain modest. We believe that the return on asset (RoA) trajectory has breached 1 percent-mark for most of the PSU banks except PNB and Bank of India," the brokerage firm said.

ALSO READ: Goldman downgrades ratings of SBI, ICICI Bank, Yes Bank, warns of stronger headwinds

Earlier, Goldman Sachs had downgraded its rating on SBI, ICICI Bank and YES Bank citing the end of 'goldilocks period' for financial sector entities. It downgraded SBI and ICICI Bank to 'neutral' from 'buy' and YES Bank to 'sell' from 'neutral.'

“We believe the proverbial Goldilocks period (strong growth and strong visible profitability) is over for the financial sector in the near-term as headwinds are increasing,” it said in a report.

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