UBS has set a target price of ₹ 150 for Canara Bank shares.
Investors’ confidence in the shares of public sector banks is continuously increasing in the stock market. In this series, the world’s famous brokerage firm UBS has placed a big bet on the public sector giant Canara Bank. In its report released on Wednesday, October 8, UBS has advised ‘Buy’ (Buy Rating) on the shares of Canara Bank.
UBS has set a target price of ₹ 150 for Canara Bank shares. This represents a potential upside of about 19% from Wednesday’s closing price of ₹126.11. This report has come at a time when many changes are being seen in the banking sector and investors are looking for stocks with strong fundamentals.
Why is UBS bullish on Canara Bank?
According to the UBS report, Canara Bank is in a very strong position to deliver consistent and stable loan growth in the times to come. There are many concrete reasons behind this. First, the clouds of many big crises looming over the banking sector are now disappearing, due to which it has become easier for banks to do business. Second, the bank has adequate liquidity, which gives it the ability to distribute loans aggressively.
In its report, UBS has found Canara Bank to be successful on both these parameters. The brokerage has admitted that due to falling interest rates, there may be some pressure on the bank’s margins in the short term. However, the long-term outlook is extremely positive.
Bank’s margins will improve
The report estimates that the bank’s margins will gradually improve during the financial year 2027-28. The reason for this will be re-fixing of interest rates on deposits and increase in the share of Marginal Cost of Funds Based Lending (MCLR) loans. Apart from this, the bank’s credit cost (provision made for bad loans) is also expected to remain under control, as the bank has distributed less unsecured retail loans.
Due to all this, the bank’s Return on Assets (RoA) is expected to remain stable at 1% and Return on Equity (RoE) at 16% from FY 2026 to 2028, which is a very impressive figure. What is most attractive is that despite these strong fundamentals, the bank’s stock is trading at a forward price-to-book value of 0.9 times, which UBS has described as “fair”.
Listing of subsidiary companies will ‘unlock value’
Another big positive news for Canara Bank is the listing of its subsidiaries. UBS has described it as a major means of ‘value unlocking’. Canara Bank’s two major units, Canara Robeco Asset Management Company (AMC) and Canara HSBC Life Insurance, are coming out with their initial public offering (IPO) next week itself.
Canara Robeco’s IPO will open on October 9, while the life insurance unit’s IPO will be available for subscription on October 10. When these companies are listed in the stock market, they will have their own market value. The parent company i.e. Canara Bank will directly benefit from this, because the value of its holding will increase.
Has given a return of 28% in the year 2025
Canara Bank shares have proved to be a multibagger for investors so far in the year 2025. This year this stock has already given a tremendous return of 28%. It is the second best performing stock of 2025 on the Nifty PSU Bank index. Indian Bank is in the first place, which has shown a stormy growth of 43%. Let us tell you that out of total 21 experts covering Canara Bank, 15 have advised to ‘buy’ it, while four have advised to ‘hold’ and two have advised to ‘sell’.
Disclaimer: This article is for information only and should not be considered as investment advice in any way. TV9 Bharatvarsha advises its readers and viewers to consult their financial advisors before taking any money-related decisions.