By Ekta Sonecha Desai
India’s banking sector is expanding at a rapid pace. With rising financial inclusion and digital penetration, banks are becoming drivers of the country’s economic growth. For investors, this sector is full of potential. Banking stocks, if selected carefully, can deliver consistent growth and long-term wealth generation. It could be a wise move to include banking stocks in your portfolio.
But choosing the best stock is half the battle. You need to ensure you’re buying it when it offers the best value.
This is where valuation ratios are used. One of the methods of determining if a banking stock is properly valued is by looking at its Price-to-Book Value (P/BV) ratio.
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The P/BV ratio looks at a bank’s market price versus its book value. This ratio is applied commonly to assess banking stocks since banks possess big financial assets, and book value is a reliable determinant of their value. An low P/BV ratio indicates that a bank’s stock could be undervalued.
In this article, we will explore five banking stocks with low P/BV ratio, which like we said before could indicate the stocks are undervalued.
5 Low P/BV Banking Companies
Company NameClosing Price as on 21st February 2025 (Rs)P/BV Ratio (x)Karnataka Bank171.00.6Bank of India98.10.6RBL Bank159.70.7South Indian Bank23.90.7Tamilnad Mercantile Bank414.60.8Source: Screener.in #1 Karnataka Bank
Karnataka Bank is engaged in providing a wide range of banking & financial services involving retail, corporate banking and para-banking activities in addition to treasury and foreign exchange business.
Karnataka Bank is currently trading at a P/BV ratio of 0.6x, making it an attractive value pick. It is trading slightly below its 10-year median of 0.7x.
Axis Securities has given a buy rating with a target price of Rs 255, implying a 49.1% upside from the current market price of Rs 183.
The bank reported an ROE of 9.6%, ROA of 0.9%, and net non-performing asset (NNPA) of 1.4% in Q3FY25. Gross NPA stood at 3.1%, down 53 bps YoY, while the provision coverage ratio (PCR) stood at 80.6%.
The bank reported a 4.9% QoQ decline in its net interest income.
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