Top three PSU bank stocks below ₹100
Summary
Which cheap PSU bank stocks should be on your watchlist? Find out…
PSU banking stocks have made a comeback over the last few years. These were once considered junk by Dalal Street because the government was keeping the banks alive by regular capital infusions.
The market sentiment for these stocks has changed of late and they now track cues like non-performing assets (NPAs), profit growth, etc.
Despite proving their viability to the market, some of these stocks are still trading at low prices. This does not mean these PSU banks are necessarily cheap, but it does get retail investors interested.
Let us look at three PSU bank stocks that are trading below ₹100. We have used Equitymaster’s powerful stock screener – Best PSU Banks Stocks in India.
#1 IDBI Bank
The share price of IDBI Bank has closed around ₹93 today, 22 May. The stock has not set the market on fire over the last one year.
This is clearly visible on the chart of the stock.
So, what is the problem here?
Well, the company is a disinvestment candidate. The stock fluctuates based on news in this regard.
IDBI Bank net profit grew 25.2% YoY to ₹2072 crore for thequarter ended March 2025. But the market isn’t too interested in the bank’s financial performance as long as there are no negative surprises.
It’s the disinvestment that Dalal Street has its eyes on. The latest news in this regard is the government is keen to complete the entire process by the end of this year, i.e. by December 2025.
Thegovernmentand the Life Insurance Corporation of India (LIC) plan to jointly offload a 61% stake in the bank, 30.48% by the government and 30.24% by LIC.
Investors should keep a hawk eye on any developments on this front.
#2 Punjab National Bank (PNB)
This bank’s stock price is slightly above ₹100, closing at ₹100.59 today. However, most of the recent share price history has been below ₹100.
In fact, the stock has been falling since early 2024.
This has been due to a combination of quarterly results not meeting the expectations of the market and a couple of big negative events.
The Supreme Court's cancellation ofJSW Steel'sacquisition of Bhushan Power and Steel Ltd. earlier this month has thrown recovery prospects of lenders into doubt.
PNB's exposure to Bhushan Power is significant at ₹6,100 crore. There is a possibility that banks may have to return the money received from JSW Steel if the deal does not go through.
This situation poses a financial risk for PNB, with potential provisions required in upcoming quarters.
PNB has received about ₹3,000 crore from JSW Steel as part of the resolution process but has not made any provisions against this exposure yet.
Then last year, there was the ‘locker’ controversy. On 6 September 2024, Yash Kapoor, a long-time customer of the bank, discovered that his family's locker, held for 64 year, had been mistakenly opened. After several failed attempts to access the locker, Kapoor was informed that it had been broken open by mistake.
Another elderly customer, who mistook it for his own, collected valuables from Kapoor's locker. The items taken included gold and diamond ornaments worth ₹270 crore.
Reportedly, the elderly customer later sold these valuables to a local jeweller, who had the items melted down, making recovery nearly impossible.
This scandal has severely damaged PNB's reputation, raising serious questions about the bank's security protocols and its gross oversight.
However, the bank has posted good results recently withimproved asset quality, lower provisions, and steady net interest income growth. The bank posted a net profit of ₹4,560 crore in Q4 FY25, a 52% increase from last year. The NII of the bank rose 4% YoY to ₹10,760 crore.
Investors need to closely monitor the bank's results going forward.
#3 UCO Bank
The bank's financials were weak until 2021 bogged down by its weak asset quality and earnings. The government supported UCO Bank with infusion of ₹22,600 crore over FY16-FY22.
Post the infusion, the bank's financial profile improved. In recent years, it has focused on improving asset quality, increasing digital services, and strengthening its balance sheet.
The latest quarter’s results were good. UCO Bank recorded a consolidated net profit of ₹660 crore for the March quarter, a 24% rise compared to ₹540 crore a year ago.
The bank’s total income reached ₹8,140 crore from ₹6,980 crore last year.
Gross non-performing assets (NPA) declined to 2.7% from 3.5% last year. The net NPA also dropped to 0.5% from 0.9% a year ago.
Investors are optimistic about the bank's ongoing turnaround and future prospects. The stock price has stopped declining recently.
There is another reason for the positive sentiment surrounding the stock. UCO Bank plans to issue up to 270 crore new equity shares during FY26. The objective is to reduce the government's ownership from 90.9% to 75%, in line with Sebi rules that require a minimum 25% public shareholding.
The estimated value of the proposed issue is around ₹8,000 crore. This move is expected to broaden the bank's investor base and strengthen its capital position.
Earlier, in the March quarter, UCO Bank completed aqualified institutional placementthat raised ₹2,000 crore. This helped lower the government's stake from 95.4% to 90.9%.
The QIP saw strong participation from institutional investors, reflecting growing confidence in the bank's future.
Reducing government ownership is viewed positively by the market. It signals better corporate governance and improved operational flexibility.
Investors should continue to monitor the ongoing turnaround in the bank’s financials.
Snapshot of PSU Bank stocks
Here's a quick view of some crucial financial parameters of PSU banks from Equitymaster's Stock Screener.
Conclusion
PSU banks have a reputation for delivering fast profits in a short time. Unfortunately, they also have a reputation for being wealth destroyers in the long run.
Thus, these stocks end up being quite volatile. This is the double-edged sword that investors have to contend with in these stocks. Its not something that faint-hearted investors can handle.
For those considering PSU bank stocks, thorough research, careful monitoring of their financials, and adequate diversification are essential to managing the risks while maximizing potential returns.
Happy Investing.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com
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