HDFC Bank is trading at 1.87 book value (lowest in over a decade), while ICICI Bank is available at2.7 times (the cheapest since early 2022).
The Price-to-Book (P/B) ratio measures a company’s market value against its book value (net assets). It helps investors identify if a stock is overvalued or undervalued, with a lower ratio suggesting better value.
Managing director and head of financial research, Suresh Ganapathy, cited the attractive valuations at which the two large private banks are trading as the reason for the choice. He also listed out HDFC Life and SBI Life from the insurance space for similar reasons.
HDFC Life and ICICI Bank were the top two gainers on the Nifty 50, both rising over 2% each, on Monday (April 13).
PSU banks may see a moderation in loan growth due to weaker deposit growth, while risks to asset quality could emerge depending on macro conditions, Ganapathy warned.The lack of deposits has been a concern building up in the banking space for a while now. Current account and savings account deposits are the cheapest source of funds for banks, and they don’t have enough of them.Banks have had to raise money from the market at higher rates to meet increased liquidity pressure, at the expense of profit margins. “Most of them will have a tough environment when it comes to margins… it would be flat to slightly down,” he said.India’s banking sector is expected to see pressure on margins and earnings in the January-March quarter of the financial year 2025-26 (FY26), while valuations remain supportive for large private banks, according to Suresh Ganapathy.PSU banks are likely to report weak fourth-quarter numbers due to treasury losses and tight liquidity conditions. For the full interview, watch the accompanying video
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