The stock, currently trading at ₹123.30, has retreated 1.67% in the latest session but remains well-positioned above its 50-day, 100-day, and 200-day moving averages, reflecting underlying technical strength. With an attractive valuation at 0.71 times book value and a compelling dividend yield of 3.24%, the bank continues to offer value for investors seeking exposure to India's public banking sector.
The bank's H1 FY26 performance has been particularly noteworthy, with cumulative net profit reaching ₹4,664.80 crores across the first two quarters, representing robust growth momentum. Interest earned for the quarter stood at ₹18,521.48 crores, up marginally from ₹18,466.61 crores in Q1 FY26, whilst other income contributed ₹2,218.39 crores to total revenues.
| Quarter | Net Profit (₹ Cr) | QoQ Change | YoY Change | Interest Earned (₹ Cr) | Net Interest Income (₹ Cr) |
|---|---|---|---|---|---|
| Sep'25 | 2,525.64 | +18.05% | +5.29% | 18,521.48 | 5,991.62 |
| Jun'25 | 2,139.16 | -19.20% | +23.35% | 18,466.61 | 6,145.78 |
| Mar'25 | 2,647.62 | +3.47% | +76.62% | 18,478.96 | 6,146.34 |
| Dec'24 | 2,558.80 | +6.67% | +35.00% | 18,317.30 | 6,151.51 |
| Sep'24 | 2,398.74 | +38.32% | +61.13% | 17,465.81 | 6,062.99 |
| Jun'24 | 1,734.28 | +15.70% | +15.52% | 17,045.63 | 6,352.67 |
| Mar'24 | 1,499.01 | -20.91% | +7.99% | 16,250.46 | 6,008.56 |
| Dec'23 | 1,895.48 | +27.32% | +63.55% | 15,318.75 | 5,526.53 |
Financial Performance: Navigating Margin Pressures with Volume Growth
Bank Of India's Q2 FY26 results reveal a nuanced picture of operational performance. Whilst net profit demonstrated impressive quarter-on-quarter growth of 18.05%, reaching ₹2,525.64 crores, the underlying dynamics warrant closer examination. Interest earned grew modestly by 0.30% QoQ to ₹18,521.48 crores, reflecting steady loan book expansion, whilst interest expended increased by 1.70% to ₹12,529.86 crores, indicating rising funding costs in a competitive deposit environment.
Net interest income (NII) contracted by 2.51% QoQ to ₹5,991.62 crores from ₹6,145.78 crores in Q1 FY26, suggesting margin compression despite volume growth. On a year-on-year basis, however, NII declined 1.17% from ₹6,062.99 crores in Q2 FY25, highlighting the sustained pressure on net interest margins across the banking sector. The bank's operating profit before provisions stood at ₹3,852.48 crores in Q2 FY26, down 5.34% QoQ but down 8.29% YoY, reflecting the challenging operating environment.
The tax efficiency improved significantly in Q2 FY26, with the tax charge standing at ₹835.18 crores (24.85% of profit before tax), compared to ₹675.05 crores (27.68%) in Q1 FY26. This normalisation of the tax rate contributed positively to bottom-line growth. Profit before tax surged 37.80% QoQ to ₹3,360.82 crores from ₹2,439.00 crores, demonstrating strong pre-tax profitability momentum.
Capital Strength and Balance Sheet Quality
Bank Of India maintains a robust capital position with a total capital adequacy ratio (CAR) of 17.24% as of September 2025, comfortably above the regulatory minimum. The Tier 1 CAR stands at 15.07%, providing substantial cushion for future growth and absorbing potential credit losses. This represents a slight moderation from 17.90% total CAR and 15.68% Tier 1 CAR in June 2025, primarily due to risk-weighted asset growth.
The bank's balance sheet has expanded significantly, with total deposits reaching ₹819,805.98 crores as of March 2025, up 10.69% from ₹740,611.44 crores in March 2024. Advances grew even more impressively to ₹653,518.22 crores, representing 15.33% year-on-year growth from ₹566,643.78 crores. This demonstrates the bank's ability to deploy capital effectively whilst maintaining adequate liquidity buffers.
Key Monitoring Point: Non-Operating Income Dependency
A notable concern in the quarterly results is the elevated contribution of non-operating income to profitability. Other income of ₹2,218.39 crores in Q2 FY26 constitutes approximately 65.68% of profit before tax, raising questions about the sustainability of core banking profitability. This heavy reliance on treasury gains, fee income, and other non-interest revenue sources warrants close monitoring, as such income streams can be volatile and may not be sustainable in all market conditions.
Return on Equity: Strong Capital Efficiency
Bank Of India's return on equity (ROE) of 12.31% in Q2 FY26 represents a healthy level of capital efficiency for a public sector bank, demonstrating the management's ability to generate attractive returns for shareholders. This ROE level, whilst below some private sector peers, compares favourably within the public banking space and reflects the bank's improving profitability trajectory. Higher ROE indicates better capital utilisation and profitability, making it a key strength in the bank's investment case.
The bank's return on assets (ROA) stands at 0.90%, indicating reasonable asset productivity. With shareholder funds of ₹80,725.76 crores as of March 2025, up from ₹70,581.26 crores a year earlier, the bank has strengthened its equity base through retained earnings, providing a solid foundation for future growth initiatives.
Peer Comparison: Competitive Positioning in Public Banking
Bank Of India's valuation metrics present a compelling case when benchmarked against public sector peers. Trading at 0.72 times book value, the bank offers a significant discount to several competitors, whilst delivering comparable or superior operational metrics. The dividend yield of 3.19% stands out as particularly attractive in the current low-yield environment, providing income-seeking investors with a tangible return whilst awaiting capital appreciation.
| Bank | P/BV Ratio | Dividend Yield | ROA (%) | CAR (%) |
|---|---|---|---|---|
| Bank Of India | 0.72x | 3.19% | 0.92% | 15.14% |
| Indian Overseas Bank | 2.27x | 0.00% | 1.03% | 15.53% |
| Bank of Maharashtra | 1.40x | 2.60% | 1.64% | 14.96% |
| Indian Bank | 1.43x | 2.10% | 1.32% | 15.27% |
| UCO Bank | 1.23x | 0.96% | 0.68% | 16.35% |
The bank's P/BV multiple of 0.72x represents a substantial discount to peers like Indian Overseas Bank (2.27x), Bank of Maharashtra (1.40x), and Indian Bank (1.43x). This valuation gap suggests either market under-appreciation of Bank Of India's improving fundamentals or lingering concerns about asset quality and growth sustainability. Given the bank's improving profitability trajectory and solid capital position, the valuation discount appears excessive, presenting an opportunity for value-oriented investors.
Valuation Analysis: Attractive Entry Point for Patient Investors
At the current price of ₹123.30, Bank Of India trades at a price-to-earnings (TTM) ratio of 5.75 times, representing one of the most attractive valuations in the banking sector. The price-to-book ratio of 0.71x implies the market is valuing the bank's assets at a 29% discount to book value, despite the bank's return on equity exceeding 12%. This disconnect between valuation and profitability creates a compelling risk-reward proposition.
The bank's PEG ratio of 0.11x suggests significant undervaluation relative to growth prospects. With a market capitalisation of ₹56,908 crores, Bank Of India ranks as the 9th largest public sector bank, offering sufficient liquidity for institutional investors whilst maintaining growth potential. The stock's 52-week range of ₹90.00 to ₹130.35 indicates current trading levels near the upper end of the recent band, though still 5.41% below the 52-week high.
Shareholding Pattern: Stable Promoter Base with Growing Institutional Interest
The Government of India, through the President of India, maintains a commanding 73.38% stake in Bank Of India, unchanged across recent quarters. This stable promoter holding provides governance continuity and eliminates concerns about management changes or strategic shifts. The absence of any pledged shares further reinforces the financial stability of the promoter entity.
| Category | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|
| Promoter | 73.38% | 73.38% | 73.38% | 0.00% |
| Foreign Institutional Investors | 4.24% | 3.53% | 3.89% | +0.71% |
| Mutual Funds | 4.65% | 4.32% | 4.37% | +0.33% |
| Insurance Companies | 10.97% | 11.29% | 10.67% | -0.32% |
| Other Domestic Institutions | 0.01% | 0.36% | 0.86% | -0.35% |
Foreign institutional investor (FII) holdings increased by 0.71 percentage points quarter-on-quarter to 4.24% in September 2025, signalling growing international confidence in the bank's prospects. The number of FII holders expanded from 207 to 233, indicating broader institutional participation. Mutual fund holdings also edged up by 0.33 percentage points to 4.65%, whilst insurance company stakes declined marginally by 0.32 percentage points to 10.97%.
The consistent accumulation by FIIs and mutual funds over recent quarters suggests institutional investors are recognising the value proposition at current levels. Total institutional holdings of 19.47% provide a stable investor base, though the relatively modest institutional participation compared to private sector peers suggests potential for further accumulation as the bank's performance trajectory continues to improve.
Stock Performance: Impressive Long-Term Returns Despite Recent Consolidation
Bank Of India's stock has delivered exceptional returns over longer time horizons, significantly outperforming both the benchmark Sensex and the broader public banking sector. Over the past three years, the stock has surged 162.90%, compared to the Sensex's 43.73% gain, generating alpha of 119.17 percentage points. The five-year return stands at an impressive 212.94%, more than doubling the Sensex's 109.97% return.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -2.76% | +1.76% | -4.52% |
| 1 Month | +3.09% | +1.52% | +1.57% |
| 3 Months | +6.29% | +2.06% | +4.23% |
| 6 Months | +5.25% | +6.87% | -1.62% |
| Year-to-Date | +20.88% | +7.44% | +13.44% |
| 1 Year | +17.77% | +3.64% | +14.13% |
| 3 Years | +162.90% | +43.73% | +119.17% |
| 5 Years | +212.94% | +109.97% | +102.97% |
The year-to-date performance of 20.88% substantially outpaces the Sensex's 7.44% gain, generating alpha of 13.44 percentage points. When compared to the public banking sector's one-year return of 8.66%, Bank Of India's 17.77% return demonstrates significant outperformance of 9.11 percentage points, validating the bank's operational improvements and market re-rating.
Recent price action has been more subdued, with the stock declining 2.76% over the past week and 1.67% in the latest trading session. The stock trades below its 5-day and 20-day moving averages but comfortably above its 50-day (₹117.94), 100-day (₹117.78), and 200-day (₹111.86) moving averages, indicating the medium-term uptrend remains intact despite short-term consolidation.
Technical Outlook: Bullish Trend with Consolidation Phase
From a technical perspective, Bank Of India's chart structure remains constructive. The stock transitioned to a bullish trend on 1st October 2025 at ₹124.63, upgrading from a mildly bullish stance. Whilst the stock has declined 1.07% since the trend change, the overall technical indicators support a positive outlook. The MACD shows bullish divergence on weekly charts, whilst on-balance volume (OBV) remains bullish across both weekly and monthly timeframes, indicating sustained accumulation.
The stock's beta of 1.20 classifies it as a medium-beta stock, suggesting it tends to move 20% more than the broader market in either direction. This higher volatility profile (32.08% annualised) compared to the Sensex (12.54%) reflects the cyclical nature of banking stocks and provides opportunities for active traders, though it also implies higher risk for conservative investors.
"Bank Of India's transformation from troubled lender to profitable growth story represents one of the most compelling turnaround narratives in India's public banking sector, now trading at less than three-quarters of book value despite double-digit ROE."
Investment Thesis: Value Opportunity with Improving Fundamentals
Bank Of India presents a compelling investment case built on four key pillars: attractive valuation, improving profitability, strong capital adequacy, and stable government backing. The bank's proprietary Mojo score of 81 out of 100 places it firmly in "Strong Buy" territory, upgraded from a "Hold" rating just six weeks ago. This rating reflects the convergence of positive fundamental trends, technical momentum, and valuation attractiveness.
The valuation grade of "Very Attractive" is supported by the P/BV ratio of 0.71x and dividend yield of 3.24%, both of which compare favourably to historical averages and peer valuations. The quality grade of "Good" acknowledges the bank's improving asset quality metrics and consistent profitability, whilst the financial trend remains "Positive" for six consecutive quarters since March 2024, demonstrating sustained operational momentum.
Key Investment Strengths
- Exceptional Value: Trading at 0.71x book value with 5.75x P/E ratio, representing significant discount to intrinsic value and peer multiples
- Strong Profitability: ROE of 12.31% demonstrates excellent capital efficiency, with net profit growing 18.05% QoQ to ₹2,525.64 crores
- Robust Capitalisation: CAR of 17.24% (Tier 1: 15.07%) provides substantial buffer for growth and credit losses
- Attractive Dividend: Yield of 3.24% offers income whilst awaiting capital appreciation, with latest dividend of ₹4 per share
- Stable Ownership: 73.38% government holding ensures governance continuity with zero pledging
- Growing Institutional Interest: FII holdings increased 0.71% QoQ to 4.24%, with 233 FII holders (up from 207)
- Impressive Long-Term Track Record: 162.90% return over 3 years, 212.94% over 5 years, massively outperforming Sensex
Key Risk Factors
- NII Compression: Net interest income declined 2.51% QoQ to ₹5,991.62 crores, indicating margin pressure in competitive environment
- Non-Operating Income Dependency: Other income at 65.68% of PBT raises sustainability concerns about core banking profitability
- Operating Profit Decline: Operating profit before provisions fell 5.34% QoQ and 8.29% YoY, reflecting challenging conditions
- Sector Headwinds: Public banks face structural challenges from digital disruption, competitive intensity, and regulatory pressures
- Higher Volatility: Beta of 1.20 and volatility of 32.08% implies larger price swings than market, unsuitable for risk-averse investors
- Recent Price Weakness: Stock down 2.76% over past week, trading below 5-day and 20-day moving averages
- Limited Institutional Ownership: Total institutional holdings of 19.47% remain modest compared to private sector peers
Outlook: What to Monitor Going Forward
Looking ahead, several factors will determine whether Bank Of India can sustain its profitability momentum and deliver on the valuation re-rating thesis. The bank's ability to defend net interest margins in a competitive deposit environment will be critical, as will its success in controlling operating expenses whilst investing in digital infrastructure. Asset quality trends, particularly in stressed sectors, warrant close monitoring despite the current healthy capital buffers.
Positive Catalysts
- Sustained quarterly profit growth above ₹2,500 crores demonstrating earnings momentum
- Improvement in net interest margins through better deposit mix and pricing discipline
- Reduction in non-operating income contribution below 50% of PBT, indicating core strength
- Further institutional accumulation by FIIs and mutual funds validating investment case
- Valuation re-rating towards 1.0x book value as profitability improvements gain recognition
Red Flags to Watch
- Further deterioration in net interest income or margins below ₹5,800 crores quarterly
- Increase in non-operating income dependency above 70% of PBT
- Capital adequacy ratio declining below 16%, limiting growth capacity
- Institutional selling by FIIs or insurance companies reversing recent accumulation trend
- Stock breaking below 200-day moving average (₹111.86), signalling trend reversal
The broader macroeconomic environment, including interest rate trajectory, credit growth trends, and regulatory changes, will also influence the bank's performance. Government policy on public sector bank consolidation, capital infusion, and governance reforms could serve as additional catalysts or headwinds depending on implementation.
The Verdict: Strong Buy on Valuation and Improving Fundamentals
Score: 81/100
For Fresh Investors: Bank Of India represents an attractive entry opportunity at current levels of ₹123.30, offering a rare combination of deep value (0.71x book), improving profitability (12.31% ROE), and income generation (3.24% dividend yield). The 18.05% QoQ profit growth in Q2 FY26 validates the operational turnaround, whilst the "Strong Buy" Mojo rating of 81/100 reflects positive convergence across valuation, quality, and momentum factors. Investors should consider building positions in tranches, targeting accumulation between ₹115-125 levels, with a 12-18 month investment horizon to capture the valuation re-rating potential.
For Existing Holders: Continue holding with conviction. The bank's sustained profitability improvement, stable government backing, and attractive valuation provide a solid foundation for medium-term wealth creation. The recent upgrade to "Strong Buy" from "Hold" status validates the improving fundamental trajectory. Existing investors should maintain their positions and consider adding on any dips towards ₹115, which would offer even more compelling risk-reward. The 3.24% dividend yield provides income whilst awaiting capital appreciation.
Fair Value Estimate: ₹155-165 (26-34% upside potential from current levels), based on target P/BV of 0.95-1.00x applied to book value of ₹159.01, reflecting gradual re-rating as profitability improvements gain market recognition and institutional participation increases.
Investment Rationale: Bank Of India's compelling valuation at less than three-quarters of book value, combined with double-digit ROE, robust capital adequacy of 17.24%, and improving institutional interest, creates an asymmetric risk-reward proposition. Whilst near-term margin pressures and non-operating income dependency warrant monitoring, the bank's transformation trajectory, stable government ownership, and attractive dividend yield make it a strong buy for value-oriented investors with a 12-18 month perspective.
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions.
