PSU bank shares have attracted the attention of investors on Dalal Street and have risen considerably over the past one month. And several reasons are being attributed to PSU bank shares outperforming the broader market – several PSU banks have reported strong financial performance in the March 2025 quarter, reasonable valuations and a ‘flight to safety’ of investors at a time when a leading private sector bank has been grappling with accounting problems.
The buoyant mood for PSU bank shares is reflected in PNB share price rising nearly 10 % to Rs 109.3 on Tuesday while Bank of India shares rose 6.6 % during this period to close at Rs 124 on Tuesday.
Even smaller PSU banks like Punjab and Sind Bank share price has risen 12.5 % over the past one month to close at Rs 32.7 on Tuesday. The broader Sensex has been broadly flat over the past one month, and ended at 80,737 on Tuesday.
Performance in the March 2025 quarter
New Delhi-based PNB Bank reported a 51.7 % y-o-y rise in its standalone net profit to Rs 4,567 crore in the March 2025 quarter. In addition, its % of net NPAs was 0.4 % in the March 2025 quarter vis-à-vis 0.73 % a year earlier.
Similarly, Mumbai-based Bank of India reported an 82.5 % growth in its standalone net profit to Rs 2,625.9 crore in the fourth quarter of FY25. And its percentage of net NPAs was 0.82% in the March 2025 quarter vis-à-vis 1.2 % a year earlier.
In contrast, Axis Bank’s standalone net profit at Rs 7,117.5 crore in the fourth quarter of FY 25 was broadly flat on a y-o-y basis. The largest private sector bank, HDFC Bank’s standalone net profit rose 6.7 % y-o-y to Rs 17,616.1 crore in the March 2025 quarter, while IndusInd Bank declared a consolidated net loss of Rs 2,328.87 crore in the fourth quarter of FY25.
IndusInd Bank has been dealing with a spate of accounting problems that have come to light over the past few weeks at the fifth-largest private sector bank, and the exit of the top management.
Outlook going forward
The RBI is widely expected to cut rates once again by 25 basis points in its policy meeting on Friday. And the above move is once again expected to help lower cost of loans to borrowers, going forward and also help the local economy deal with the impact of the tariff war unleashed by the Trump administration over the past few months.
Investors will also be monitoring how PSU and private banks will manage a key operational parameter, net interest margin (NIM) over the next few quarters.
Investors on Dalal Street
And despite the broad run up in PSU bank shares they trade at valuations much lower than private sector banks. SBI at Rs 809.75 on Tuesday, trades at a P/E of about 9 times estimated standalone FY26 earnings. The largest bank in the country had a median PE of about 11.8 over the past 10 years, according to Screener.
PNB Bank trades at a P/E of about 6 times estimated standalone FY 26 earnings. This PSU bank had a median PE of about 15 times over the past 10 years, according to Screener.
In contrast, Kotak Mahindra Bank trades at a P/E of about 22 times estimated standalone FY 26 earnings. This bank had a median PE of about 35 times over the past 10 years, according to Screener.
And, Axis Bank trades at a P/E of about 13 times estimated standalone FY 26 earnings. It had a median PE of about 18 times over the past 10 years, according to Screener.
And given the reasonable valuations of PSU banks, one could consider evaluating these shares from a long-term investment basis.
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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