The best way to value a bank is the Price to Book Value ratio (P/B). Assume a banks Book Value is 100, which means, even if the bank goes burst tomorrow, you will receive 100 per share back. But if this banks stock is trading at 500, it means its trading at 5 times the book value & hence the Price to Book Value (P/B) = 5.

Higher the price to book, expensive the stock. You cant just compare P/B between 2 banks & conclude it to be cheap or expensive. You have to compare the current P/B with the average P/B of the bank to come to a conclusion.

PSU’s are trading at a premium to their 5 years P/B where as some private banks look cheap at this point.

- Bank Of Baroda is trading at a P/B of 1.28 where as the average 5 years P/B is 0.65.
- PNB is trading at 1.47 vs the 5 year average of 0.58
- HDFC is trading at 2.54 vs the 5 years average of 3.53
- Kotak is traing at 3.74 vs the 5 years average of 5.12

HDFC & Kotak look cheaper than BOB & PNB

#FPAEdutech #FinancialPlanningAcademy #KirtanShahFPA #KirtanShahCFP #PSU #PrivateBanks #GovernmentBanks #PSUBanksVsPrivateBanks #BankingInvestments #FinancialAnalysis #InvestmentDecisions #BankingSector #PublicVsPrivateBanks #StockMarketInsights #FinancialComparison #BankingStocks #InvestmentTips

свернуть