HDFC Overtakes ICICI Market Cap
HDFC Bank India’s second largest private bank by assets overtook ICICI Bank the largest private lender in India in terms of market capitalisation at the end of October, making it the largest Indian private bank based on market capitalisation.
Government owned State Bank of India (SBI) still dominates the Indian financial landscape and by any measure including market capitalisation is double the size of its nearest privately owned rivals. SBI’s market cap at the end of October stood at Rs. 84,077 crore (US$17 billion).
ICICI Bank has been the worst performing Indian financial stock this year, falling 45 per cent from mid September to the end of October. In the same period HDFC Bank’s share price has dropped just 17 per cent.
The change in rankings and difference in corrections largely reflects the contrasting strategies both lenders have adopted. ICICI Bank embarked on an ambitious growth strategy in the personal loan segment across all income levels, compromising on credit quality in its thirst for market share. HDFC on the other hand, has grown at a more measured price, focusing more on the quality of its portfolio rather than its size.
HDFC Managing Director Aditya Puri in an interview with the Business Standard said “We always restricted ourselves to the middle and upper-middle income levels. What has fallen out of the demand market is the people at the bottom who had higher interest rates.”
ICICI Bank for its part has modified its strategy and is slowing down lending. At the beginning of the year with the Sensex peaking, it was talking of double digit percentage growth clips in retail advances. It has since sobered up and projections have been lowered to around 5 per cent. In recent months, the bank pulled out of two-wheeler finance at dealerships and stopped offering the post-dated cheque facility for consumer durable purchases.
HDFC Bank’s Puri said he expects growth, which has been in the range of 25 to 30 per cent in recent years, to continue. “Our portfolio is fine and so is our growth momentum. We will see some impact on the SMEs, and the companies, but this impact will be more in terms of a squeeze on the profits rather than the viability,” he said.
HDFC Bank for now remains India-focused, ICICI Bank, on the other hand, has worked on having a global footprint with a presence in the United Kingdom, Canada, Germany, Middle East, Singapore and the US. At the end of March, 2008 ICICI Bank’s international operations accounted for about 25 per cent of its consolidated banking assets, one of the reasons that provoked rumours about its sub-prime exposure.
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