Canara Bank, Bank of India, PNB, SBI, UCO Bank were among major gainers on Friday as public sectors banks were in focus. Union Budget could lead to re-ranking of some of the public sectors banks in India as many of them have reported strong quarterly numbers with lower NPA levels. TopNews Team has reviewed some of the best performers from public sector banks for investors to make informed decisions. While recent quarters have reinforced the sector’s structural repair story—through deposit growth, credit expansion, and lower non-performing assets—uncertainty around interest rates, foreign investment policy, and Union Budget 2026 expectations continues to temper outright optimism. Analyst consensus points to selective upside rather than a broad rerating, with valuation gaps, execution quality, and earnings visibility increasingly determining stock-level outcomes.

Bank of India: Earnings Momentum and Asset Quality Drive Relative Outperformance

Bank of India has emerged as one of the more consistent performers within the PSU banking universe, underpinned by steady balance sheet expansion and improving profitability metrics.

Global deposits reached Rs 8,53,301 crore in Q2FY26, representing a 10.1% year-on-year increase and 2.4% sequential growth, signaling sustained confidence from depositors even amid competitive funding conditions. Advances expanded at a faster pace, with loan growth of 13.9% YoY, reinforcing the bank’s revenue visibility through higher interest-earning assets.

Profitability trends have followed suit. Net profit for the quarter rose 6.42% YoY to Rs 2,576.69 crore, supporting investor confidence in the bank’s turnaround narrative. Asset quality has remained a central pillar of this re-rating, with a gross NPA ratio of 2.54%—among the better metrics in the PSU cohort—and a multi-year net profit CAGR of 46.49%, aided by record interest income.

Market action has reflected these fundamentals. Bank of India shares have rallied in recent sessions, touching Rs 156.76 on the NSE and marking a 52-week high of Rs 152.5 on January 5, 2026. Relative valuation continues to attract attention, with the stock often cited as a value alternative to larger peers such as SBI heading into 2026.

Analyst Positioning on Bank of India: Optimism with Defined Risk Bands

Brokerage commentary has reinforced Bank of India’s near- to medium-term appeal, albeit with varying degrees of conviction.

ICICI Securities has issued a bullish call with a target price of Rs 180, recommending a buying range of Rs 132–140 and a stop loss at Rs 115. This implies an upside potential of nearly 26% over a 12-month horizon, based on historical trend analysis and favorable market phases.

Broader analyst consensus, drawn from a smaller pool of five to six analysts, is more conservative. Average 12-month targets cluster between Rs 138 and Rs 150, with upside scenarios extending to Rs 180 and downside estimates near Rs 120. This range reflects neutral-to-buy stances ahead of Q3FY26 earnings scheduled for January 21, 2026.

Independent platforms such as INDmoney peg a more restrained target of Rs 126.40, implying roughly 11.7% upside from recent trading levels around Rs 111.5, grounded in steady but unspectacular quarterly growth assumptions.

Canara Bank: Strong Medium-Term Performance Meets Policy-Induced Volatility

Canara Bank’s stock trajectory highlights the tension between improving fundamentals and episodic policy-driven volatility.

The shares came under pressure in December 2025 following a Finance Ministry clarification on FDI limits in public sector banks, triggering a 4% decline in early trade. Yet this pullback came against a backdrop of strong medium-term performance. The stock has rallied over 26% in the past six months and 45% year-to-date, recently touching a 52-week high of Rs 154.2.

Management guidance remains constructive. Credit growth of around 13% is projected for FY26, spanning retail, corporate, and MSME segments. Net interest margins are expected to remain conservative at approximately 2.75%, a stance that could prove resilient if policy rates remain stable, though vulnerability persists should rate cuts materialize.

Operationally, Q2FY26 presented a mixed picture. Consolidated revenues rose 10.5% YoY and 1.4% QoQ, but expenses increased at a similar pace. Meanwhile, Q1 net profit declined 21.45% YoY to Rs 3,194.95 crore, reflecting short-term pressures rather than structural weakness.

Canara Bank: Analyst Confidence Skews Toward Long-Term Upside

Despite near-term volatility, analyst sentiment toward Canara Bank remains broadly supportive.

Bajaj Broking Research named Canara Bank a top pick for January 2, 2026, signaling short-term bullishness, even though no explicit target was provided in the note.

Across a wider analyst universe of 18–19 analysts, average 12-month targets range from Rs 127 to Rs 153, with optimistic projections extending to Rs 175 and conservative estimates between Rs 95 and Rs 115. Importantly, 10 analysts categorize the stock as a “strong buy”, reflecting confidence rooted in 33.15% FY25 net profit growth and ongoing loan book expansion.

Longer-horizon forecasts from market-tracking platforms project substantially higher levels. Some models anticipate prices reaching Rs 207 by the end of 2026, predicated on sustained NPA improvement and operating leverage. AlphaSpread’s estimates align closely with an average valuation of Rs 151.47, while bullish cases extend toward Rs 183.75.

Punjab National Bank: Earnings Recovery Meets Valuation Skepticism

Punjab National Bank has delivered one of the sharpest earnings recoveries among PSU peers, though market confidence remains uneven.

The stock has gained momentum in recent sessions, rising 2.5% to around Rs 124.3 on the NSE and marking its fifth consecutive day of gains. Still, performance over the prior month remains slightly negative, with the stock down about 0.8%. On valuation, PNB trades at a modest trailing P/E of 9.1, reflecting both recovery potential and lingering skepticism.

Earnings growth has been decisive. Q4FY25 net profit surged 49.28% YoY to Rs 4,989.29 crore, alongside 3.92% sequential growth, underscoring a tangible turnaround in profitability. Sector-wide momentum, reflected in gains in the Nifty PSU Bank index, has provided additional support.

PNB Analyst Outlook: Wide Ranges Reflect Diverging Expectations

Consensus estimates for Punjab National Bank highlight the market’s divided view.

Among 21 analysts, the average 12-month target stands between Rs 123 and Rs 128, closely aligned with current prices. However, upside scenarios extend to Rs 166–168, while downside estimates fall between Rs 90 and Rs 100. Ratings skew toward caution, with 7 strong buys, 4 buys, and 5 holds.

INDmoney’s assessment places a target of Rs 122.94, implying a potential downside of about 7% from recent highs near Rs 145. In contrast, longer-term projections from forecasting platforms suggest a more aggressive trajectory, with monthly targets climbing toward Rs 225 by December 2026, assuming steady growth and sustained sector tailwinds.

Union Budget 2026 and the Road Ahead

Union Budget 2026 discussions add another layer of complexity. Expectations around infrastructure spending, tax policy, and credit facilitation could materially influence PSU banks’ growth trajectories. A supportive budget could act as a catalyst for further rerating, while unfavorable signals may exacerbate volatility.

Overall, declining NPAs, improving profitability, and stable margins position these banks for measured upside in 2026. Yet, macroeconomic variables and regulatory clarity will remain decisive in shaping investor outcomes.

Key Comparative Snapshot

Strategic Takeaway for Investors

The PSU banking sector is no longer a binary recovery trade. Stock selection now matters more than sector exposure. Bank of India offers momentum-backed value, Canara Bank presents a volatility-adjusted growth story, and PNB remains a high-beta turnaround with uneven conviction. For 2026, disciplined positioning—aligned with earnings visibility and policy clarity—will likely separate outperformers from laggards.