Higher P/B
🔍 ICICI trades at ~3.3× P/B. HDFC at ~2.9×. Axis at ~2.5×. Kotak at ~3.4×.
But here’s the real question: Does higher P/B always mean better?
Most investors talk about P/E ratio. But for banks & financials, the Price-to-Book (P/B) ratio often tells the deeper story.
P/B in simple terms
P/B = Market Price ÷ Book Value per Share
👉 It shows how much investors are paying compared to the bank’s net worth (assets – liabilities).
Why it matters for banks
Since banks don’t have factories or patents, their true strength lies in loans, deposits & risk management. That’s why P/B often works better than P/E here.
How to read it
P/B < 1 → Might look cheap, but could also signal weak business quality.
P/B > 3 → Premium valuation, usually for strong ROE, growth, or trust.
Current snapshot
ICICI Bank (3.3×) → rewarded for improving ROE (~17%) & asset quality.
HDFC Bank (2.9×) → slightly lower, but unmatched consistency.
Axis Bank (2.5×) → discount, reflecting its turnaround journey.
Kotak Bank (3.4×) → premium, backed by strong capital base & efficiency.
But beware — where P/B can mislead
A bank with risky loans may still trade at a high P/B before stress shows up.
Sudden write-offs/NPA spikes can shrink book value overnight.
High P/B ≠ always good → it must align with ROE, NIM, governance & growth visibility.
Takeaway
P/B is a powerful lens — but only when combined with ROE, NIM & asset quality.
❓ Your View:
When valuing banks — do you rely more on P/E or P/B, and what pitfalls do you watch for?
