Private sector banks in India are developing much faster and are way ahead in terms of technology adoption, new product development and value added services provided. Public sector banks on the other hand enjoy an edge only in terms of large distribution network.
State Bank of India (SBI), is India's largest bank with an asset base of more than Rs 2,225 bn while HDFC Bank's asset base is just 2% of SBI. It runs the world's largest branch network of 9,000 branches and controls around 22% of India's loans and deposits. The bank is a leading player in trade finance and forex.
HDFC Bank is promoted by India's most recognised housing finance company HDFC. Its technologically superior branch networks (111 automated branches) and high quality services backed by HDFC's reputation grant it an advantage over other private sector banks. The bank provides a range of services including working capital finance, trade services, corporate finance and merchant banking. Among the private sector banks it has the lowest non-performing assets and enjoys comparatively higher capital adequacy ratio.
The comparative table reflects the quality of assets enjoyed by both the banks. HDFC Bank's topline is growing much faster than SBI and profit margins are superior. Although the size of the bank is not comparable but in terms of valuation parameters, HDFC Bank enjoys premium valuations. HDFC Bank's market capitalisation is 60% of SBI's market cap with Price/Book value ratio more than 8 times.
Comparative financial analysis
Interest income (Rs bn)
Net profit (Rs bn)
Operating profit margins
Net profit margins
Market Price (Rs)
Price/Book value (x)
Market Cap (Rs bn)
Market Cap/Gross income (x)
In the scenario of intense competition, SBI is also shifting its focus to e-banking where HDFC Bank has already made a foray. The valuation parameters of SBI will change only if it gears up with the latest technology and excellent customer services with diversified product portfolio.
HDFC Bank declared the results for the third quarter of financial year ending March 2017 (3QFY17). The bank has reported 18% YoY and 15% YoY growth in net interest income and net profits respectively in 3QFY17.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407