Bank stocks performance by market cap in 2021- HDFC vs Kotak bank Vs SBI vs ICICI Vs Axis Vs IndusInd bank ( Review)

It is important for any country and its GDP growth. This is often the banking sector.
In the first part let's discuss the overview of the banking sector.
Here we are going to also speak about the recent steps taken by RBI and important reports which can offer you and summary of the banking sector.
In the second part, we'll discuss about six stocks that are vital within the banking sector of India.
We will discuss the financial parameters which are highly important for any banking stock investment.
India's banking sector consists of 12 public sector, 22 private sector and 46 foreign banks that operate in India. Additionally, there are 56 Gramin Banks. From here you'll understand that India's banking sector is big and there are many alternative players. Another interesting fact. There are 1,485 and 96,000 urban co-operative banks and rural co-operative banks respectively in India. There have been over 2,00,000 ATMs in India in August 2020. Their projected growth is predicted to exceed 2,00,000 ATMs by the top of 2021 and reach 4,00,000 ATMs a year. The COVID situation badly affected many sectors. The banking sector was the worst affected thanks to the whole covid situation.
From here we are able to understand that Nifty has climbed above its old level. But Bank nifty has not risen and is trading at the identical level. PSU index continues to be below pre-covid levels. Here you'll understand that the banking sector is badly suffering from matters of covid. Not only the banking sector was affected because of covid, but the banking sector of the full world was negatively affected.
People weren't ready to pay their loans as their income was directly affected. This had an identical adverse impact not only on corporate companies but also on the retail sector. From here you'll be able to understand that the whole sector was stricken by covid. RBI took several steps to present relief to the present sector and increase income.
Let us discuss about them intimately.
To give relief to the centre class, RBI made an announcement on 27 March 2020. The RBI governor offered a moratorium of three months to all or any lenders (those who have outstanding term loans as on 1 March 2020) to public/private sector banks, but was applicable to any or all rural and concrete sector banks.
On 22 May 2020, the amount of this moratorium was extended till 1 August 2020. After this the borrowers approached the Supreme Court and demanded waiver of interest for the moratorium period. Following this, the Supreme Court on November 27 directed the central government to supply interest waiver on loans up to Rs 2 crore and defined 8 categories during this regard. It asked the central government to implement it. These categories were MSME, Housing and Education. Loans belonging to those categories were selected for interest waiver. Thereafter the Supreme Court got another interim order on 3rd September 2020 where it declared that non-NPA loans till 31st August will remain non-NPA till further orders. Here the RBI approached the Supreme Court to lift the interim order (as they're facing hardship). This order remains operative. The loans which weren't included within the NPA till August 31 are still not included in it. A report came out on 9 September 2020. This was the report of the RBI expert committee headed by ICICI Bank chief KV. Kamath gave plenty of data to an investor.
But after the epidemic, problems started emerging there. These sectors also become stress sectors. Their total loan amount was Rs 15.5 lakh crore (loan), from here you'll understand that there was huge debt on the affected areas. If there's debt on any sector and it's affected, then it's quite normal for the banking sector to be affected. But this, the expert committee got wind that the retail and wholesale trade has been the foremost affected thanks to the pandemic and that they have outstanding debt of Rs 5.4 lakh crore. But this, the expert committee report also said that 11 sectors were already under stress and after the pandemic, they faced further pressure and had a debt of around Rs 22 lakh crore.
The NBFC sector which was already fraught was hit by Rs 7.98 lakh crore. From here you'll understand that the lending sector was badly hit because of the pandemic. a crucial report came out on 11 January 2021 (a few days ago) where a very important aspect was recommend. The name of this report was RBI Financial Stability Report. In an exceeding worst-case scenario, the gross NPAs might be above 14% by September 2021. A year ago that number was 7.5%. This report suggests that this number can go up to 14% within the worst case (when we discuss about Gross NPAs.)
Banks can suffer lots thanks to bad loans. RBI has mentioned to line aside some amount to keep up the income. PCR is employed for this. Its full form is Provision Coverage Ratio. It’s the proportion of the number put aside by the bank to hide its losses (if there are bad loans). This report tells us that the PCR has increased to 72% from 66.2% earlier.
The next thing discussed within the report was - bank credit growth remained sluggish i.e. bank credit growth (the money on which the bank earns money) was stagnant. There wasn't much development there. It absolutely was also said that the world was under stress and policy measures by any institution were to bring them back to normalcy. But he also said that within the coming times, except bringing this sector to normal level, it's necessary to require policy measures towards recovery and growth. The RBI also tried to require the repo rate to a record low and opened a further line of credit for various banks. If banks are in need of funds then they will approach RBI and use the credit line in order that their business gets an even bigger recovery within the times to return.
So this was the discussion about the whole banking sector.
Now allow us to discuss about 6 banks and that we will try and compare them through various metrics.
Only you may not get a transparent picture as any bank. You will not be ready to compare apples to apples. We’ve got handpicked HDFC Bank, Kotak Mahindra Bank, ICICI Bank, SBI, Axis Bank and IndusInd Bank as compared of six banks.
Here we've got talked about the worth earlier, now let's discuss the capitalisation.
The largest bank in India during this regard is HDFC Bank. Its capitalization is around Rs 8 lakh crore. The capitalization of Kotak Mahindra Bank is approximately Rs 3,83,000 crore. Some days back it had overtaken ICICI Bank.
Now let's discuss ICICI Bank. Its market capitalisation is Rs. 3,76,000 crore SBI, Axis Bank and IndusInd Bank have a capitalisation of Rs 2.5 lakh crore, Rs 2 lakh crore and Rs 70,000 crore respectively. The P/E ratio is extremely important after we discuss an industry. A company's P/E ratio is compared thereto of other companies. It tells the worth of the corporate in relevancy its earnings. Here let me tell you that P/B value is more important than P/E ratio just in case of banks.
Banks must state their value. It’s important for you to grasp its value against the value of the bank. The P/B value is a very important metric to check the banking sector as an entire. Kotak Mahindra Bank has the best P/B ratio is 5.72. After this let's speak about HDFC Bank. Its P/B value is in second place with 4.53 points. The P/B value of ICICI Bank is around 3. The P/B values of IndusInd Bank, Axis Bank and SBI are 2.07, 2.36 and 1 respectively. This suggests that the value and price of SBI are equal. Across industries, an occasional P/E ratio generally means a business is undervalued. However, it's not right to underestimate a business on the idea of P/E ratio!
The P/B ratio is additionally just like the P/E ratio. The low P/E ratio is well received by investors.
Now let's speak about return on equity i.e. return made by banks on equity investment. The very best return on equity investment is given by IndusInd Bank with an ROE of 14.58%. The RoE of HDFC Bank is 16.53%. The ROE of Kotak Mahindra Bank is 13.67%. From here you get an inspiration about ROE. The subsequent important parameter after returns is that the asset quality of the bank. If you run a business to lend money then the foremost important thing for you is that the possibility of recovery from the party to whom the money is lent. Parenthetically one party doesn't return your money and you have got 10 parties. During this case, you do not get money from one party and acquire money from other 9 parties. Then your income from those 9 parties would be 0 because one party did not pay your money. Following this, asset quality is vital for banks further.
We will discuss two important parameters associated with this - Gross NPA and Net NPA.
Let us discuss the difference between the 2. When an organization books its NPAs as a loss i.e. makes provisioning and deducts it as a loss from its P/L statement, then the web NPA comes from there. It’s generally believed that low net NPAs and gross NPAs are considered good for the bank. Its asset quality is taken into account remarkable. Since HDFC Bank has very cheap gross NPA. It’s around 1.08%. This can be the minimum. After this let's discuss Kotak Mahindra Bank. Its gross NPA is 2.55%. The Gross NPA of ICICI Bank is 5.17%. The gross NPAs of SBI, Axis Bank and IndusInd Bank are 5.28%, 4.18% and 2.21% respectively. HDFC Bank has also been the simplest performer in terms of Net NPAs.
Its net NPA is 0.17%. It’s followed by IndusInd Bank, Kotak Mahindra and ICICI Bank with a net NPA of 0.52%, 0.64% and 1% respectively. SBI's Net NPA is 1.59% and is that the highest among of these 6 banks. Now let's speak about the subsequent metric. This is often important for investing within the banking sector. Its name is net interest margin.
Now you need to be wondering what's Net Interest Margin?
Let's say I run a business to lend money. If I lend money then I charge 15% interest from that person. But I'll also borrow money. I pay 10% to the person from whom I borrow the cash. Here the margin of fifty is that the net interest margin. Higher margin will contribute (more) to the income of the bank. A high NIM (parameter) is mostly considered noteworthy to investors and banks. We’ve got talked about net interest margin. Here the NIM of HDFC Bank is kind of healthy which is around 4.10%. Kotak Mahindra Bank has the very best number here - 4.61%. The NIMs of IndusInd Bank and Axis Bank are 4.16% and 3.58% respectively.

In 2008, when the financial crisis was at its peak, Basel 3 norms came out for the whole banking sector. From there comes important parameters like capital adequacy ratio etc. This ratio talks about the assets of a bank. A bank that runs a business within the banking sector faces lots of risks.
To mitigate such risks, banks must keep some money in healthy assets. If there's any problem here, the banks will need to face heavy pressure. Those that have kept their hard-earned money should be paid back with adequate money from the banks. For this Basel 3 norms including capital adequacy ratio were proposes. These are vital for the healthy functioning of any bank. Capital adequacy is that the percentage of cash that it keeps in safe assets. A high percentage of this can be considered noble. RBI says banks must adhere to minimum percentage while keeping money for capital adequacy. Capital Adequacy Ratio of all 6 banks is healthy.
Here HDFC Bank incorporates a capital adequacy ratio of 19.1%. This is often one amongst the biggest numbers. It’s followed by Kotak Mahindra Bank, ICICI Bank, SBI, Axis Bank and IndusInd Bank with 17.9%, 15.6%, 14.72%, 19% and 16% CAR respectively. Usually this number is quite 12-13%. this can be considered an affordable limit. But HDFC and Axis Bank have CARs of 19%, which are considered healthy numbers. So this was the discussion about six banks.
High income in an exceedingly business and economic activity is taken into account superb for banks. The number given by the banks are going to be considered safe if there's sufficient income. Together with this, their credit growth will increase in future. In recent days the financial organisation has predicted that GDP will shrink by 7.5% this year. Earlier this number was 9.5% (compared to the old estimated number). That number has now dropped. It’s a matter of virtue. If economic activities devour pace, then improvement is seen here. Interest rates are currently at their lowest level. Thereafter, the credit growth sector has not seen much improvement. Within the near future of these things will depend upon the business activities. Banks' loan books will expand if business activities and credit growth improve. This can ultimately increase the profits of the banks. Within the times to return, we'll find out how economic activity improves and its material impact on bank credit growth.
A report by S&P Global suggests that the NPA to debt ratio (amount of debt as a percentage of outstanding debt) is anticipated to rise to 10-11% by March 2021. The amount was 7.6% in September 2020. That's an expectation that emerges from a report by S&P Global.
If you invest in any banking stock then you need to remember of the business, different ratios of banks (important under banking sector) to require a choice as an investor. As a wise investor, invest over an extended period of your time so you'll earn remarkable returns.
(Warning: Please invest supported your research. this text is for information sharing only)