3 weeks ago
Three PSU Banks with SBI-Like Performance Trade 58%-63% Cheaper
Banks are places where people save money and borrow money.
In India, some big banks are owned by the government, and these are called PSU banks.
Four of these banks - Central Bank of India, Bank of India, Bank of Baroda and State Bank of India - shared how they performed in the April-June quarter of 2026.
All of them gave out many more loans than they did one year before, which is a good sign.
Three of the banks look cheaper to buy than the biggest one, State Bank of India.
A cheap bank share costs less compared to the money the bank has.
One bank, Bank of Baroda, earned much less profit because it had to pay a very big amount as part of a legal settlement.
The biggest bank, SBI, has its lowest level of bad loans in more than twenty years.
The article asks investors to keep an eye on the three cheaper banks and see if they keep doing well.
Central Bank of India, Bank of India and Bank of Baroda trade at 0.7x, 0.7x and 0.8x price-to-book, roughly 58%-63% cheaper than State Bank of India's (SBI's) 1.9x.
Central Bank of India led Q1 FY27 loan growth at 29% y-o-y to Rs 3.46 lakh crore, with corporate loans expanding 46.5%.
Bank of India's standalone net profit rose 36.2% y-o-y to Rs 3,067.9 crore, the fastest among the four banks.
Bank of Baroda's net profit fell 71.9% y-o-y to Rs 1,278.4 crore due to a one-time Rs 5,680 crore exceptional expense from a legal settlement with UAE-based NMC Group.
SBI's net NPA ratio improved to 0.38%, its lowest in over two decades, and the Reserve Bank of India (RBI) kept the repo rate unchanged.
- Who
- Public sector banks Central Bank of India, Bank of India, Bank of Baroda and State Bank of India (SBI), analysed by financial journalist Amriteshwar Mathur.
- What
- Three mid-sized PSU banks delivered strong loan growth in the June 2026 quarter yet trade at 0.7x-0.8x price-to-book, about 58%-63% cheaper than SBI's 1.9x.
- Where
- India, on Dalal Street, the country's stock market hub.
- When
- June 2026 quarter (Q1 of FY27); stock prices cited are from the Friday before publication.
- Why
- Strong double-digit credit growth and lower provisioning have put the three reasonably valued banks on investors' 2026 watch list, while the RBI keeps rates unchanged to support lending.
Mid-tier PSU banks are undervalued
SBI's premium is justified
Are the cheap PSU bank valuations justified?
Mid-tier PSU banks are undervalued
Central Bank of India, Bank of India and Bank of Baroda trade at just 0.7x-0.8x book despite double-digit loan growth, so investors may be missing a bargain.
SBI's premium is justified
SBI's 16.2% RoE and 0.38% net NPA ratio justify its 1.9x valuation; the mid-tier banks' lower RoE (11.6%-13.8%) explains their discount.
Bank of Baroda's profit collapse
Mid-tier PSU banks are undervalued
The 71.9% profit decline is a one-time hit from a Rs 5,680 crore NMC Group legal settlement, with underlying provisioning down 67.3% y-o-y.
SBI's premium is justified
The large exceptional expense shows mid-tier PSU banks still carry legal and legacy risks that cheap valuations do not fully capture.
Can double-digit credit growth continue?
Mid-tier PSU banks are undervalued
Growth of 17.6%-29% in the typically slack June quarter shows strong demand for high-margin gold, vehicle and SME loans.
SBI's premium is justified
SBI's FY27 credit growth forecast of 14%-15% is below its Q1 pace, suggesting system-wide growth will moderate.
Key facts
- Cheapest PSU banks (P/B ratio)
- Central Bank of India 0.7x; Bank of India 0.7x; Bank of Baroda 0.8x
- SBI price-to-book ratio
- 1.9x
- Central Bank of India loan growth
- 29% y-o-y to Rs 3.46 lakh crore (Q1 FY27)
- Bank of India net profit growth
- +36.2% y-o-y to Rs 3,067.9 crore
- Bank of Baroda net profit change
- -71.9% y-o-y to Rs 1,278.4 crore
- Bank of Baroda exceptional expense
- Rs 5,680 crore legal settlement with UAE-based NMC Group
- SBI net NPA ratio
- 0.38%, lowest in over two decades
- SBI FY27 credit growth forecast
- 14%-15% y-o-y
Sources
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