Combined m-cap of PSBs lags behind HDFC Bank’s by a mile

Mumbai: The total market capitalisation of all government-owned banks is a little more than half the value of HDFC Bank, India’s largest private lender.

The value of the 13 listed state-owned banks stood at 2.55 lakh crore as per the respective closing prices of their shares on Friday, while HDFC Bank’s market cap was 4.6 lakh crore.

Analysts expect this difference to widen further as private banks are expected to continue capturing market share from their public sector rivals. Also, their loan books are likely to deteriorate faster than private sector peers in the aftermath of the lockdown.


“They will bear the brunt of majority of the rise in non-performing assets. They have more exposure to MSME segment in the overall pie. PSU banks are likely to participate more in various credit guarantee schemes given by the government,” said Kajal Gandhi, analyst at ICICIdirect.

But for State Bank of India, whose value was 1.35 lakh crore on Friday, the total market cap of these public sector lenders would have been even lower.

Among private sector lenders, Kotak Mahindra Bank is the second most valued with a market cap of 2.22 lakh crore.

The Nifty PSU Bank index hit a over a decade low at 1,078.45 on Wednesday.

While the Nifty has recovered over 20% from its 52-week low hit on March 24, Bank Nifty is up 7.2% from the 52-week low of 16,116.25 hit on the same day. The Nifty Private Bank index is up 11% from its 52-week low of 8,487.25 hit on March 24.

“We are negative on PSU banks considering the risk of lending to borrowers. Their creditworthiness has deteriorated due to Covid-19 without a significant backstop from the government.On the other hand, lower reverse repo will further cut income generating opportunity for the banks,” said Abhimanyu Sofat, head of research at IIFL. Sofat is bullish only on State Bank of India within PSU banking space.

Ravi Sundar Muthukrishnan, head of institutional equity research at Elara Securities also believes that PSU banks are likely to continue languishing. “With interest rates falling, deposits will be hard to come by now generally for everybody, but PSU banks will fare worse,” said Muthukrishnan.

“If one really wants to invest in PSU banks, SBI is a better bet. Overall, we prefer private banks such as HDFC Bank, ICICI Bank and Axis Bank in that order,” added Muthukrishnan.