Two Indian banks – HDFC Bank and State Bank of India (SBI) – now figure in the list of top 50 global banks in terms of market capitalisation.
HDFC Bank, the country’s second-largest private lender in terms of asset size, ranks 45th with a market capitalisation of $ 39 billion, Bloomberg data showed. A rank below is India’s largest-lender SBI with a market capitalisation of $ 38 billion.
ICICI Bank, ranked 53rd, is the only other Indian bank to figure in the list of top 100 most-valued global banks. Market capitalisation, or value, of an entity is calculated by multiplying total number of shares outstanding with the stock price.
Indian lenders have been able to make a huge leap in rankings thanks to a sharp rally in their share prices in the past one year. Shares of HDFC Bank have gained 50% in the last one year, SBI has nearly doubled and ICICI Bank has added over 70%.
One year ago, none of the Indian banks featured even in top 75 most-valued global banks. HDFC Bank had the best ranking of 76 among Indian lenders during the start of last year.
BSE Bankex, a barometer for performance of banking stocks, has been one of the best-performing sector index in the last one year. It has gained 75% beating a 33% rise in the benchmark Sensex.
The rise in banking shares is anticipation of revival in the domestic economic growth led by reform push by the new government. Bank stocks are considered to be a play on economic growth of the country.
“Expectation that the domestic economy will revive has contributed to the gains in the Indian stock market. The monetary policy action and hopes of government reforms have led to an improvement in investors’ sentiment,” said Vaibhav Agrawal, vice-president – research, Angel Broking.
Industrial and Commercial Bank of China (ICBC) tops the list of global banks with a market capitalisation of $ 285 billion, over seven times that of HDFC Bank. The list of top global banks is dominated by Chinese banks, with Bank of China ($ 212 billion), China Construction Bank ($ 208.1 billion) and Agricultural Bank of China ($ 202 billion) being the
other three banks.
Wells Fargo ($ 263 billion) and JP Morgan Chase ($ 205 billion) are other major global banks with a ranking of 2 and 5 respectively.
Experts believe none of the Indian banking institution features in the top 10 lists as the banking business in the country is quite fragmented with large number of players.
“Compared to India, many of the Asian economies have fewer banks. China, for instance, has only four major banks. This gives an opportunity to these banks to grow in size. Also, the size of the economy is a factor. The economies of US or China are much bigger in size than that of India,” Ashvin Parekh, managing partner at Ashvin Parekh Advisory Services, said.
US, the world’s largest economy, has gross domestic product (GDP) of nearly $ 17 trillion, size of the China’s economy is $ 9.2 trillion, while that of India is $ 1.9 trillion.Analysts say bank assets typically grow at over two times the economic growth rate.
In terms of asset-size Indian banks have to do a lot of catching up with their global counterparts. HDFC Bank, for instance, has assets of $ 84 billion, that’s only a fraction of ICBC’s over $ 3 trillion.
SBI has the highest assets among Indian lenders at $ 400 billion but still a far cry compared to $ 2.4 trillion, the average asset size of top five global banks.