2 Banking Stocks That You Should Start "Selling Now"

Union Bank of India

According to broking firm Emkay Global, the stock of Union Bank of India is a sell as the firm expects a target price of Rs 30 on the stock. That is a near 15- to 17% knock from the current market price of Rs 35.70.

So, a few of the reasons Emkay Global cites for selling the stock is the relatively weak asset-quality profile, subdued return ratios and traditionally sub-par capital position, calling for continuous dilution.

"Despite weak core profitability, Union Bank reported a strong beat in net profits at Rs 13.2 billion (est. a loss of Rs 4.6 billion), driven by lumpy recovery from Bhushan Power and a tax reversal. The bank expects higher profitability in FY22 due to tax benefit on accumulated losses," the broking firm has said.

 

Punjab National Bank

Punjab National Bank is another sell by Emkay Global. According to the firm, sub-par growth and elevated stressed assets remain a concern.

The Punjab National Bank stock, which is currently trading at Rs 42.50, has a price target of Rs 33 by the brokerage firm.

"Despite the lumpy resolution of Bhushan Power & Steel in Q4, Punjab National Bank reported relatively moderate profitability vs. peers at Rs 5.9 bilion (est. Rs 6.2 billion), mainly due to the continuation of subdued growth and higher interest reversals on NPAs/waiver. We raise our target price to Rs 33 from Rs 29, mainly taking into account the earnings upgrade and revision in subs/investment value to Rs 7 from Rs 4. However, we retain Sell and underweight in EAP due to continued concerns around the bank's asset quality and its sub-par return ratios compared with other Public Sector Banks," the brokerage firm has said.

Conclusion

Banking stocks have no doubt rallied significantly following the opening-up of lockdowns across India. But, the over exuberance maybe a little overdone for the time being, given that the second wave of lockdowns, is likely to have some bearing on asset quality.

Also, some of the banks have raised capital and there is some serious equity dilution that has happened. To expect banking stocks to give whopping returns from here would a little far-fetched. Investors might continue to hold onto banking stocks and not buy, however, to expect significant gains from here on will be optimistic.

Disclaimer

The 2 stocks mentioned above for a "sell" are taken from a brokerage report by Emkay Global. We are not a qualified financial advisor and any information herein is not investment advice. It is informational in nature. All readers and investors should note that neither Greynium nor the author of the articles, nor the brokerage would be responsible for any decision taken based on these articles. Please do consult a professional advisor. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and authors do not accept culpability for losses and/or damages arising based on information in GoodReturns.in