CHOPPY WATERS, CALM SEAS

The banking sector remains fraught with uncertainties; however, India's Top 3 banks - HDFC Bank, ICICI Bank, and SBI have shown remarkable resilience

- SURABHI

THE SMELL TEST. For most bankers, this often remains a key yardstick—even though informal—to assess the credibility of a borrower and their ability and intent to pay off a loan.

The smell test seems to be working, at least for some of India’s largest banks, which have remained largely unscathed in terms of bad debt, amidst concerns over unsecured loans in recent months. This is reflected in their Q2FY25 results.

It is also evident in investor sentiment. India’s three largest banks—State Bank of India, HDFC Bank, and ICICI Bank—also remain amongst the Top 10 most valued companies by market capitalisation. According to this year’s BT500 study, the market capitalisation of these three lenders—HDFC Bank (No. 3 on the BT500 list), ICICI Bank (No. 4) and SBI (No. 7)— has grown by 20% or more between October 2023 and September 2024. The average annual market capitalisation of Kotak Mahindra Bank has, however, dropped by about 3% in this period; it is now at No. 16, falling from No. 12 in 2023.

STELLAR PERFORMANCE

These three banks have also posted steady growth in profit after tax (PAT) for FY24, as well as lower gross non-performing assets (GNPA) in FY24 compared to FY23. Their results in Q2FY25 also reflect this trend and have pleasantly surprised the markets and analysts amidst mixed results from several other lenders.