The smaller PSU banks had last week highlighted their retail-led growth strategy to deal with the pressure on net intertest margins (NIM). Investors on Dalal Street were keenly awaiting the results of Punjab National Bank (PNB), the second-largest PSU bank, in a bid to understand its strategy for various operational parameters in the December 2025 quarter.
The PNB stock fell 3% to Rs 128.5 in Monday trade with investors fretting over the jump in provisions for non-performing assets in Q3FY26. The stock had hit a 52-week high of Rs 135.2 recently.
Q3FY26 – Margins under pressure
Net interest margin (NIM) for domestic operations of PNB was 2.65% in the December 2025 quarter vis-à-vis 3.09% a year earlier.
Earlier, for smaller PSU rivals, Chennai-based Indian Overseas Bank (IOB) NIM was 3.32% in the December 2025 quarter and broadly flat on a y-o-y basis.
For Pune-based Bank of Maharashtra, its NIM was 3.88% in Q3FY26 vis-a-vis 3.98% a year earlier.
The RBI had cut repo rates in early December 2025, as part of several steps taken by the central bank to reduce lending rates in the broader banking system, and it had created temporary pressure on NIMs of banks.
Retail vs. Corporate: The growth engine
With regard to another important operational parameter – growth in advances, PNB’s advances grew nearly 11.9% y-o-y to Rs 11.96 lakh crore in Q3FY26, and that was driven by a 19.1% y-o-y growth in its retail loans to Rs 2.43 lakh crore.
The bank in its results presentation has highlighted vehicle loans grew 35.7% y-o-y in the December 2025 quarter.
Earlier, for Chennai-based IOB, its advances grew 18.8% y-o-y to Rs 2.91 lakh crore in Q3FY26. The above growth in advances was driven by a 43% y-o-y growth in its retail advances and 34% y-o-y growth in its agriculture loans in Q3FY26.
Meanwhile, Bank of Maharashtra’s advances were Rs 2.69 lakh crore in the December 2025 quarter, a growth of nearly 20%. The Pune-based bank benefited from its retail advances that grew 36.4% y-o-y in Q3FY26.
Retail loans like car and gold loans typically enable banks to earn a higher rate of interest vis-a-vis loans to top rated corporate clients and enable banks to better manage the pressure on NIMs.
And HDFC Bank, the largest private sector bank, its advances were Rs 28.21 lakh crore at the end of Q3FY26, a growth of 12% y-o-y.
HDFC Bank has been very cautious on growing its loan book, given its credit to deposit ratio is well over 90%. In the December 2024 quarter, the largest private sector had grown its advances by just 2.9% y-o-y.
Table: December Quarter 2025 in Numbers
| Bank | NIM (%) | RoA (Annualized) | Net NPA (%) | Retail Growth (YoY) |
| Punjab National Bank | 2.65% | 1.06% | 0.32% | 19.1% |
| Bank of Maharashtra | 3.88% | 1.86% | 0.15% | 36.4% |
| Indian Overseas Bank | 3.32% | 1.28% | 0.24% | 43.0% |
Asset quality & provisions
PNB’s provisions for non-performing assets were Rs 1,341.4 crore in the December 2025 quarter vis-à-vis Rs 317.5 crore a year earlier.
The New Delhi-based lender in its results presentation has highlighted higher sector-wise fresh slippage in Q3FY26 in agriculture and corporate loans. As a result, its sector-wise fresh slippage was Rs 1,824 crore in the December 2025 quarter vis-à-vis Rs 1,600 crore a year earlier.
To the bank’s credit, it has highlighted its provision coverage ratio of 90.25% in the December 2025 quarter and broadly in tune with a year earlier. The provisioning made by PNB is well above regulatory requirements related to NPAs.
PNB’s % of net NPAs was 0.32% in the December 2025 quarter vis-à-vis 0.41% a year earlier.
A strong growth in retail loans helped PNB’s standalone’s net profit rise 13.1% y-o-y to Rs 5,100 crore in the December 2025 quarter.
Meanwhile, asset quality of IOB was also fairly good – its % of Net NPA was 0.24% in the December 2025 quarter vis-a-vis 0.42% a year earlier.
For Bank of Maharashtra too, its asset quality was good – its % of net NPAs was 0.15% in the December 2025 quarter vis-a-vis 0.2% a year earlier.
A 23% y-o-y drop in IOB’s provisions for non-performing assets to Rs 307.7 crore in the December 2025 quarter, helped its standalone net profit rise 56.4 % y-o-y to Rs 1365.1 crore in the quarter under review.
In contrast, for Pune-based Bank of Maharashtra its provisions for non-performing assets were Rs 660 crore in the December 2025 quarter vis-a-vis Rs 593.2 crore a year earlier.
However, a strong growth in its loan book helped the bank’s standalone net profit rise 26.5% y-o-y to Rs 1,779.3 crore in the December 2025 quarter.
And HDFC Bank’s standalone net profit rose 11.5% y-o-y to Rs 18,635.8 crore in the quarter under review.
Operational efficiency (RoA)
PNB’s return on Assets (annualised) was 1.06 % in the December 2025 quarter.
Meanwhile, for IOB, its RoA (annualised) was 1.28% in the December 2025 quarter and for Bank of Maharashtra, its RoA (annualised) was 1.86% in the December 2025 quarter.
Growth strategy and valuations
| Bank | P/B Ratio (Price to Book) | P/E Ratio (Price to Earnings) |
| Punjab National Bank | 1.1x | 9.4x |
| Bank of Maharashtra | 1.5x | 7.9x |
| Indian Overseas Bank | 1.9x | 14.4x |
| SBI | 1.9x | 12.2x |
Investors will be closely monitoring PNB, Indian Overseas Bank and Bank of Maharashtra and other leading banks for their ability to grow their loan books, manage NIMs and other operational parameters over the next few quarters.
PNB has guided for loan growth of 11%-12% and NIMs of 2.8%-2.9% during FY26.
PNB trades at a standalone P/E of 9.4 times, according to Screener.in. On a valuation metric, price to (standalone) book value it trades at 1.1 times. Over the past five years, PNB has traded at a price to (standalone) book value between 0.3 times and 1.5 times.
Meanwhile, IOB trades at a standalone P/E of 14.4, according to Screener.in, while Bank of Maharashtra trades at 7.9 times.
Indian Overseas Bank trades at a price to (standalone) book value of 1.9 times, according to Screener.in. Over the past 5 years, it has traded at price to (standalone) book value between 1.1 and 5.2 times. The stock is trading closer to lower levels on the above valuation metrics.
Bank of Maharashtra trades at price to (standalone) book value of 1.5 times.
Over the past 5 years, it has traded at price to (standalone) book value between 0.7 and 2.9 times. It is trading close to the mid-level of the above valuation metric.
SBI, the largest PSU bank, trades at 1.9 times price to (standalone) book value, and over the past 5 years it has traded between 1 and 2.3 times
PNB trades at reasonable valuations vis-à-vis larger and smaller PSU banks. Investors could add PNB Bank to their watch list of stocks for calendar year 2026.
Disclaimer:
Amriteshwar Mathur is a financial journalist with over 20 years of experience.
The writer and his family have no shareholding in any of the stocks mentioned in the article.
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