Brokerage firm UBS has upgraded its ratings on two of the largest PSU Bank stocks, State Bank of India Ltd. and Bank of Baroda Ltd. and raised their price targets by up to 22%.

The brokerage has upgraded SBI to “neutral” and raised its price target to ₹840 apiece, implying an upside potential of 7.7% from SBI’s Thursday’s closing price.

UBS has also upgraded Bank of Baroda to “buy” and raised its price target to ₹290 per share, which implies a potential upside of 22.1% from its last closing price.

For SBI, the brokerage said the risk-reward is balanced and India’s largest lender sustaining its net interest margins (NIMs) will be the key for its re-rating going forward.

UBS said the average core pre-provision operating profit (PPOP)-to-assets-ratio is nearly 1.5% in the first nine months of the financial year 2025.

The brokerage has also raised SBI’s earnings per share (EPS) estimates by 3% for financial year 2026 and 5% for the following year.

UBS said the key risk for the stock would be a greater competitive intensity and SBI’s relatively low common equity tier-I (CET-I) ratio

It expects SBI’s improved liquidity, which is ₹80,000 crore in surplus at the end of March compared to its peak deficit of ₹3.3 lakh crore, income tax rebate and 8th pay commission recommendations to boost its loan and deposit growth.

Of the 50 analysts that have coverage on SBI, 40 have a “buy” rating, eight have a “hold” rating and two have a “sell” rating.

UBS has upgraded Bank of Baroda on the back of its stable outlook and attractive valuations.

It said the bank’s net interest margin (NIM) are to witness relatively lesser pressure compared to its private peers. Also, its valuations are undemanding and the brokerage expects its credit costs to remain controlled.

UBS expects a loan growth of around 12% over financial year 2025-2027 period, while a higher mix of marginal cost of funds-based lending rate (MCLR) book will keep the NIM compression modest for Bank of Baroda.

As a result, the brokerage has estimated the lender’s return on assets (RoA) to be around 0.9% and return on equity (RoE) to be around 13% over the current and the next financial year.

UBS said that Bank of Baroda shares are trading at 0.8 times its September 2026 estimated price-to-book value ratio, which is near its five-year average.

Of the 36 analysts that have coverage on Bank of Baroda, 29 have a “buy” rating, five have a “hold” rating and two have a “sell” rating.

SBI shares have gained nearly 9% and Bank of Baroda shares have gained 21% in the last month.

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