Mid-sized PSU banks are attracting increased attention of investors on Dalal Street on account of their very reasonable valuations and strong December 2025 quarter results.
Valuation Gap: Mid-Caps vs. SBI
To dig deeper we looked at valuations of PSU banks with a market capitalisation of less than Rs 1 lakh crore.
We then looked at a valuation matrix – price to (standalone) book value (P/B ratio) – for instance, Bank of India trades at a P/B just 0.9 times, according to Screener.in, while Indian Overseas Bank trades at 1.8 times.
Other mid-sized PSU banks like Bank of Maharashtra trade at 1.5 times on the above valuation matrix while Uco Bank trades at 1.1 times, Central Bank of India at 0.8 times and Punjab and Sind Bank at 1.4 times.
The largest PSU bank, State Bank of India (SBI), trades on the valuation matrix, P/B ratio at 1.8 times, according to Screener.in.
P/B ratio
| Uco Bank | 1.1 |
| Bank of Maharashtra | 1.5 |
| Bank of India | 0.9 |
| Central Bank of India | 0.8 |
| Indian Overseas Bank | 1.8 |
| Punjab & Sind Bank | 1.4 |
| SBI | 1.8 |
Performance in Q3FY26 – Pressure on NIM and retail-led loan growth
Let’s focus our attention on the three cheapest banks basis the P/B ratio.
Performance in the December 2025 quarter
| NIM % | Loan growth (%) | Net Profit growth (%) | |
| Central Bank of India | 3% | 21% | 31.7% |
| Bank of India | 2.6% | 15% | 7.5% |
| Uco Bank | 3.3% | 17.2% | 15.8% |
Coming to the performance of mid-size PSU banks and how well they managed the pressure on net interest margin (NIM) and other operational parameters…
Mumbai-based Central Bank of India’s NIM was 3% in the December 2025 quarter vis-a-vis 3.5% 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.
Its advances grew a strong 21% y-o-y to Rs 3.16 lakh crore in the quarter under review, and its retail advances grew 20.9% y-o-y in the quarter under review.
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.
Meanwhile, Bank of India’s NIM was 2.6% in Q3FY26 vis-a-vis 2.8% a year earlier. Its advances grew a healthy 15% y-o-y to Rs 7.27 lakh crore in the December 2025 quarter, and that was also due to its retail advances that grew 20.6% y-o-y in the quarter under review.
For Kolkata-based Uco Bank, its NIM domestic was 3.3% in the December 2025 quarter vis-à-vis 3.4% a year earlier. Its advances were Rs 2.38 lakh crore in Q3FY26, a growth of 17.2% y-o-y, and that was thanks to a 28.2% y-o-y surge in its retail loans.
SBI will declare its December 2025 results on 7 February, 2026.
Asset Quality & The NPA Picture
The asset quality of mid-sized PSU banks has been good, and provisioning for non -performing assets have been under control on y-o-y basis. This enabled them to report a higher net profit in the December 2025 quarter.
For instance, Central Bank of India’s % of net non-performing assets was 0.45% in Q3FY26 vis-a-vis 0.59% a year earlier.
Its provisions were Rs 276.2 crore for the December 2025 quarter vis-a-vis Rs 309.8 crore a year earlier. As a result, Central Bank of India’s standalone net profit grew 31.7% y-o-y to Rs 1,262.6 crore in Q3FY26.
The core banking operations of PSU banks are reflected in their standalone quarterly results.
Meanwhile, Bank of India’s percentage of net NPAs was 0.6% in the December 2025 quarter vis-a-vis 0.85% a year earlier.
Its provisions for non-performing assets were Rs 605.2 crore in Q3FY26 and broadly flat on a y-o-y basis. Strong loan growth helped Bank of India’s standalone net profit rise 7.5% y-o-y to Rs 2,704.7 crore in the December 2025 quarter.
And Uco Bank’s % of net NPA was 0.36% in Q3FY26 vis-à-vis 0.63% a year earlier.
Its provisions for non-performing assets were Rs 278.9 crore in the December 2025 quarter, a rise of 5.7% on a y-o-y basis. Strong loan growth helped Uco Bank’s net profit rise 15.8% y-o-y to Rs 739.5 crore in the December 2025 quarter.
Efficiency kings – Return on Assets (RoA)
Central Bank of India’s return on assets (annualised) was 1.01 % in the December 2025 quarter.
For Bank of India, its return on assets (annualised) was 0.96% in the December 2025 quarter.
And Uco Bank’s return on assets (annualised) was 0.83% in the December 2025 quarter.
SBI’s return on assets (annualised) was 1.17% in the September 2025 quarter.
Stock price performance on Dalal Street
Bank of Maharashtra was broadly flat in late-Friday trading at Rs 66, and not too far from its 52-week high of Rs 67.8 that was reached on 14 January, 2026.
Meanwhile, Bank of India was down 3.7% to Rs 160.3 in late Friday trade, and not too far from its 52-week high of Rs 168.3 that was reached on 22 January, 2026.
In contrast, Uco Bank was down 0.6% to Rs 28.8 in late Friday trade, and hovering above its 52-week low of Rs 26.8 that was reached on 7 April, 2025.
Similarly, Central Bank of India was down nearly 2% to Rs 36.5 in late Friday trade, and above its 52-week low of Rs 32.8 that was reached on 9 May, 2025.
Growth outlook and investors on Dalal Street
Investors will be closely monitoring Central Bank of India, Indian Overseas Bank, Uco Bank, Bank of India 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.
Uco Bank has guided for loan growth of 12-14% for FY26, and NIM of 2.8%-2.9% in the current financial year.
Meanwhile, Central Bank of India trades at a standalone P/E of 7 times, according to Screener.in, while Bank of Maharashtra at 7.8 times, Bank of India trades at 7.2 times.
Punjab & Sind Bank trades at 15.8 times and Uco Bank at 13.7 times.
Meanwhile, SBI trades at a standalone P/E of 13.3 times.
Mid-sized PSU banks are broadly cheaper in valuations vis-à-vis SBI, are poised for reasonable growth over the next few quarters. Investors will also be keeping a close eye on whether any merger plans of PSU banks are announced by the government, going forward.
Investors could add mid-sized PSU banks to their watch list.
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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