HDFC Bank overtakes SBI in market capitalisation

HDFC Bank overtook India's largest bank, SBI, in market capitalisation on Tuesday, 15th Nov, 2011. The shares of HDFC Bank closed at Rs 471.80, taking its market cap to Rs 110321 cr, overtaking SBI's market share that stood at Rs 109831 cr.

The banking sector is facing serious issues like rising interest rates and asset quality deterioration. This is evident from the fact that the BSE Bankex is down 22% on a YTD basis. SBI is down 37% on a YTD basis, while HDFC Bank is almost stable at the same level, which shows that it has outperformed (adjusted with stock split). 

With high provisioning, SBI has not able to show good profits in the last 3 quarters. On a consolidated basis for FY11, SBI reported a 9% decline in Net Profits to Rs 10684 cr on the back of huge provisioning of Rs 3081 cr. In October 2011, Moody's downgraded SBI's financial strength by one notch to D+ on account of low Capital Adequacy Ratio (CAR) and deteriorating asset quality. The bank has an exposure of approximately Rs 1410 cr to Kingfisher Airlines, which has further spoiled the image of the bank.  

In stark contrast, HDFC Bank has had a strong performance in the past quarters, and is able to sail smoothly in this high interest environment. This is evident from the fact that the Net Profits of the bank in the last 4 quarters has shown consistent growth of 30% , along with outperforming its peers, ICICI and SBI.

The following table presents a comparative picture of the recent Q2 FY12 performance of SBI and HDFC Bank: 

Further, we went ahead to check the market capitalisation of these banks in the last 5 years. We can clearly see that HDFC Bank’s market capitalisation has increased by 261% in the last 5 year frame, while that of SBI increased by 103%.