3 PSU banks with SBI-like performance trade 58%-63% cheaper. What is the market missing?

The Valuation Gap: Why Mid-Tier PSU Banks Trade Below 1x Book Value

To find the cheapest PSU banks, we looked at the preferred valuation matrix – price-to- (standalone)- book value (P/B ratio). This is what we came up with – both Central Bank of India and Bank of India trade at a P/B of just 0.7 times, according to Screener.in, while Bank of Baroda trades at 0.8 times (view table below).

Meanwhile, State Bank of India, the largest PSU bank, trades at 1.9 times.

Let’s focus our attention on these three cheapest PSU banks, in terms of their core operational performance.

Credit Expansion: The High-Margin Loans Fueling Q1 Advance Growth

Central Bank of India grew its advances by a buoyant 29% y-o-y to Rs 3.46 lakh crore with high margin retail loans growing 23.9% y-o-y to Rs 1.05 lakh crore and corporate loans expanding by 46.5% y-o-y to Rs 1.12 lakh crore.

Meanwhile, Bank of India grew its advances by nearly 19.8% y-o-y to Rs 7.87 lakh crore and that was thanks to a 20% y-o-y growth in high margin vehicle loans and 27% y-o-y growth in other loans, which includes gold loans.

Performance of Central Bank of India, Bank of India, Bank of Baroda and SBI in the June 2026 quarter (standalone results)

Bank	Loan growth (% change y-o-y)	Deposit growth (% change y-o-y)	Net Interest Margin (NIM) in %	Growth in net profit (% change y-o-y)
Central Bank of India	29%	11.7%	3.06%	13.3%
Bank of India	19.8%	14.9%	2.52%	36.2%
Bank of Baroda	17.6%	13.8%	2.8%	-71.9%*
State Bank of India	18.9%	9.7%	3%	10.2%

*Bank of Baroda’s net profit was hit by a one-time exceptional expense of Rs 5,680 crore relating to legal settlement with UAE-based NMC Group

And Bank of Baroda grew its advances by 17.6% y-o-y to Rs 13.95 lakh crore and that was owing to a 38.4% y-o-y growth in agriculture-related gold loans to Rs 84,412 crore coupled with a 25.3% y-o-y growth in auto loans to Rs 59,436 crore and 20.3% y-o-y growth in SME loans.

For perspective, SBI grew its advances by 18.9% y-o-y to Rs 49.9 lakh crore, and to the largest bank’s credit, it had grown its SME loans by 22.3% y-o-y while agri loans grew 25.4%. Retail loans also grew 15.2% y-o-y.

The June quarter is typically a ‘slack’ season for credit, with individuals, small and large companies still evaluating their financial objectives for the new financial year. Also, it is a quarter where a large number of families are on holiday and demand for credit is typically slack. The strong double-digit loan growth recorded by these banks is commendable.

The Liquidity Engine: How Time Deposits Are Funding PSU Lending

Of equal importance, Central Bank of India’s deposits grew by 11.7% y-o-y to Rs 4.78 lakh crore, and the bank has highlighted 12.4% growth in time deposits (largely fixed deposits).

Meanwhile, Bank of India grew its deposits by 14.9% y-o-y to 9.57 lakh crore, and that was thanks to a strong 22.9% y-o-y growth in time deposits to Rs 5.21 lakh crore.

For Bank of Baroda, its deposits grew by 13.8% y-o-y to Rs 16.33 lakh crore, and that was also owing to a 17.8% y-o-y growth in term deposits (fixed deposits) to Rs 8.6 lakh crore.

And SBI grew its deposits by 9.7% y-o-y to Rs 60.05 lakh crore with the bank reporting growth of 9.9% in time deposits, largely fixed deposits. And savings bank deposits grew 10.3% y-o-y.

Deposits form the basis of extending credit for a bank, short and long-term to clients.

Navigating Rate Pauses: The Battle to Protect Net Interest Margins

The net interest margin (NIM) is a closely tracked operational parameter of banks. The RBI left the repo rate unchanged in its monetary policy meeting on Wednesday, and it has broadly signaled a continuation of its policy of lower interest rates in the economy and boosting overall lending in the banking system. This has created temporary pressure on NIMs of banks and banks have for several quarters focused on higher margin loans like gold, vehicle and SME loans.

For Central Bank of India, its NIM was 3.06% and broadly flat from a year earlier. Meanwhile, Bank of India’s NIM too was 2.52% and broadly flat from a year earlier.

And Bank of Baroda’s NIM was 2.8% as compared to 2.9% a year earlier.

SBI’s domestic NIM was 3% and broadly similar to a year earlier.

Asset Quality Check: Lower Provisions Accelerate Core Profitability

Central Bank of India’s % of net non-performing assets (NPA) was 0.49% and similar to a year earlier. Its provisions for NPAs also declined nearly 26% y-o-y to Rs 346.4 crore. Strong loan growth and lower provisions helped Central Bank of India’s standalone net profit rise 13.3% y-o-y to Rs 1,323.7 crore.

Meanwhile, Bank of India’s percentage of net NPAs was 0.5% as compared to 0.75% a year earlier. The bank’s provisions for NPAs were broadly stable — it was Rs 1,144 crore, a rise of 3.6% y-o-y. Strong loan growth helped Bank of India’s standalone net profit rise 36.2% y-o-y to Rs 3,067.9 crore

And SBI’s asset quality has continued to remain strong, and virtually matching HDFC Bank, which has one of the lowest NPA ratios in the domestic banking industry and is often viewed as the benchmark.

SBI’s % of net NPAs was 0.38% as compared to 0.47% a year earlier. SBI has highlighted its lowest NPA ratio in more than two decades.

SBI’s provisions for non-performing assets were Rs 3,359 crore quarter as against Rs 4,934 crore a year earlier.

The bank’s other income fell 9% y-o-y; however, that was offset by lower provisioning for non-performing loans. And strong loan growth helped SBI’s standalone net profit rise by 10.2% y-o-y to Rs 21,121 crore

The standalone quarterly results of Central Bank of India, Bank of India, Bank of Baroda and SBI reflect their core banking operations.

The NMC Group Settlement: Decoding Bank of Baroda’s 71.9% Profit Drop

Bank of Baroda’s net NPA to net advances was 0.5% as compared to 0.6% a year earlier. Its provisions also declined 67.3% y-o-y to Rs 643 crore. The bank however, had an exceptional expense of Rs 5,680 crore relating to legal settlement with UAE-based NMC Group.

As a result, Bank of Baroda’s standalone net profit declined nearly 71.9% y-o-y to Rs 1,278.4 crore.

Capital Efficiency: SBI’s 16.2% RoE Benchmark Against Mid-Sized Peers

Central Bank of India’s standalone Return on Equity (RoE) is 11.6%, according to Screener.in, 12.4% for Bank of India, and 13.8% for Bank of Baroda.

SBI had a RoE of 16.2%.

Return on Equity – Performance of different banks

Bank	Standalone Return on Equity (RoE) in %
Central Bank of India	11.6%
Bank of India	12.4%
Bank of Baroda	13.8%
State Bank of India	16.2%

The 2026 Watchlist: Do Current Valuations Justify the Growth Trajectory?

Investors will continue to watch the local impact of the Middle East crisis on Central Bank of India, Bank of India, Bank of Baroda and SBI amongst other banks, in terms of rise in NPAs, NIMs and any signs in slowdown in credit growth, going forward.

SBI has given a credit growth forecast of 14%-15% y-o-y during FY27, and that is broadly lower than what has been achieved in Q1FY27

Central Bank of India ended 0.3% lower at Rs 31.4 on Friday, and the stock trades at 0.7 times price-to-(standalone) book. Over the past 5 years, the stock has traded between 0.3 times and 2 times.

Meanwhile, Bank of India ended 1.6% higher at Rs 144.8 on Friday, and the stock trades at 0.7 times price-to-(standalone) book. Over the past 5 years, the stock has traded between 0.3 times and 1 times.

Valuations of 3 PSU banks v/s State Bank of India

Bank	Price-to-(standalone) book value
Central Bank of India	0.7 times
Bank of India	0.7 times
Bank of Baroda	0.8 times
State Bank of India	1.9 times

And Bank of Baroda ended flat Rs 250 on Friday, and the stock trades at 0.8 times price-to-(standalone) book. Over the past 5 years, the stock has traded between 0.5 times and 1.4 times.

State Bank of India ended 1% higher to Rs 1,096 on Friday, and the stock trades at 1.9 times price-to-(standalone) book. Over the past 5 years, the stock has traded between 1.4 times and 2.3 times.

Central Bank of India, Bank of India and Bank of Baroda trades at much lower valuations than the largest PSU bank, SBI. Investors can put these three reasonably valued PSU banks on their watch list of stocks for 2026, and see if the growth expectations of these banks matches performance, going forward.

Disclaimer:

Amriteshwar Mathur is a financial journalist with over 20 years of experience.

Disclosure: The writer and his family have no shareholding in any of the stocks mentioned in the article.

The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.