A rather choppy session for the markets with select pockets of opportunities today. The Financial sector stocks have been in focus after the encouraging Q4 numbers that indicated an overall improvement in asset quality. Key international brokerage house Jefferies has identified three stocks from the banking and financial space. They have a buy rating on all these 3 stocks and see upside potential of upto 28%.
Here is a quick look at the top Buy recommendations from Jefferies at this hour-
Jefferies on Punjab National Bank
Jefferies has retained the Buy rating on Punjab National Bank share price with the price target unchanged at Rs120. This implies nearly 28% upside for the PNB share price.
The brokerage house has raised the FY26 and FY27 earnings estimates and expects the bank to deliver a 0.8% return on assets in FY27. They also expect the “bank to move to new tax regime (subject to using deferred tax assets) from H2FY26 and see a fall in tax rate from 37% now to 25%.” According to them, given healthy ROA, asset quality, and reasonable valuation, they expect the “price to book valuations at 0.9x FY26.”
According to them, “better recoveries from written-off loans” helped the overall asset quality ratios. PNB continues to have among the highest coverage ratios on NPLs at 90%. “The recovery from written-off loans was strong and was a key driver.” Jefferies added. The bank also recognised MTM gains and recoveries worth Rs 1,300 crore from the sale of loans to JPA to NARCL. They expect the “credit cycle to normalise and credit costs to be around 30 bps for FY26 and 60 bps for FY27; scope to lower coverage ratio slightly could limit rise in credit costs.”
Jefferies on Bandhan Bank
Jefferies maintained Buy on Bandhan Bank, though they tweaked estimates. They believe the bank has “derisked its MFI loans better than peers, and the transition to a lower MFI mix will be positive.”
Over the next 2 years, the bank aims to lower the share of MFI loans to 35% from 40% now. Higher growth in housing, other retail and commercial is expected to offset the drag and help “15-17% loan growth over 2-3 years,” they added. They see the management investment in building teams, distribution networks, capacity building, and building transaction banking and forex platforms as key drivers.
The bank however, remains watchful of asset quality trends in the near term. Bandhan has a lower share of leveraged borrowers with “Bandhan+3 & more only at 8% of loans, but will watchout for stability over H1FY26,” Jefferies added.
They added that the bank’s “exposure in Karnataka & Tamil Nadu (sub-1% of MFI each)” is lower and the book in Bihar is faring well.
Jefferies on Max Financial Services
Jefferies has a Buy on Max Financial Services with a target price of Rs 1,700 per share. This implies a 15% upside for the share price of Max Financial Services over 12 months. According to them, the “exit of CEO is a slight setback, but smooth transition is key.” They believe that the “sector tailwinds may help and some shift to Non-Par and healthy business growth can provide cushion. Correction may be an opportunity to add. “Axis Max Life’s CEO Prashant Tripathy sought early retirement and “smooth succession will be key and internal elevation may be preferred,” Jefferies added.