So, just to be sure, HDFC bank trading at p/e multiples of 22, at a market cap of 15 lakh cr valuation is somehow a larger company than SBI trading at multiples around 9, with a market cap of 7.6 lakh crore. Actually, not only large, Mr. Market is of the strong opinion, that HDFC with its 2.2 lakh employees working in 9500 of is branches operating a customer base of 12 crore is TWICE-IN-SIZE than SBI's 2.5 lakh employees working (beyond lunch breaks..😅) in 23,000 branches operating a customer base of 50 cr. Now my finance & banking bros might chip in that number of branches and employees, or customer bases have little to do with a bank's core fundamentals, numbers or its growth trajectory.
Well let's crunch some numbers too then.
So as of last year, HDFC brought home a net profit of 60k Cr on a revenue of 3 lakh Cr in FY24, growing at a solid 26% YoY. Meanwhile, a relatively smaller SBI (half to be precise..), posted 61k Cr in net profit on 4.5 lakh Cr revenue, with a 20% profit growth. HDFC's 9,500 branches and 12 crore customers somehow make it worth 15 lakh Cr, while SBI's 23,000 branches, 50 crore customers, and larger deposit base of 49.2 lakh Cr (vs. HDFC's 27.7 lakh Cr) can bite dust at 7.6 lakh Cr. HDFC's return on equity at ~17% shines brighter than SBI's ~14%, and its post-merger efficiency and digital push does justify a premium valuation in it's own might. And also in matters of operational efficiency, HDFC's a clear winner as reflected in margins and other ratios, but does that really justify the current market cap and multiple? More of a narrative luxury if you ask me, rather than a value play.. But 'valuable price' and 'pricey value' are often separated only by a faint line, and sometimes it gets really difficult to contemplate which is which. Is HDFC overhyped bordering on "irrational exuberance" or is SBI just another cheap "Sarkari Bank" and hence ignored? But with SBI's 22.5% deposit share vs. HDFC's 10.5%, and advances of 37.7 lakh Cr vs. HDFC's 25.6 lakh Cr, I can't help but form a bias with SBI. Not investment advice but just me preferring scale & absolute profit at a sensible multiple over efficiency & low credit risk at 2× earnings premium, I relate and resonate better with the position on that perspective..no, I won't tattoo the blue logo on my arm anytime soon, but fresh longs will be initiated on dear Sarkari Bank with fair valuation. Maybe glam doesn't suit me..
Well let's crunch some numbers too then.
So as of last year, HDFC brought home a net profit of 60k Cr on a revenue of 3 lakh Cr in FY24, growing at a solid 26% YoY. Meanwhile, a relatively smaller SBI (half to be precise..), posted 61k Cr in net profit on 4.5 lakh Cr revenue, with a 20% profit growth. HDFC's 9,500 branches and 12 crore customers somehow make it worth 15 lakh Cr, while SBI's 23,000 branches, 50 crore customers, and larger deposit base of 49.2 lakh Cr (vs. HDFC's 27.7 lakh Cr) can bite dust at 7.6 lakh Cr. HDFC's return on equity at ~17% shines brighter than SBI's ~14%, and its post-merger efficiency and digital push does justify a premium valuation in it's own might. And also in matters of operational efficiency, HDFC's a clear winner as reflected in margins and other ratios, but does that really justify the current market cap and multiple? More of a narrative luxury if you ask me, rather than a value play.. But 'valuable price' and 'pricey value' are often separated only by a faint line, and sometimes it gets really difficult to contemplate which is which. Is HDFC overhyped bordering on "irrational exuberance" or is SBI just another cheap "Sarkari Bank" and hence ignored? But with SBI's 22.5% deposit share vs. HDFC's 10.5%, and advances of 37.7 lakh Cr vs. HDFC's 25.6 lakh Cr, I can't help but form a bias with SBI. Not investment advice but just me preferring scale & absolute profit at a sensible multiple over efficiency & low credit risk at 2× earnings premium, I relate and resonate better with the position on that perspective..no, I won't tattoo the blue logo on my arm anytime soon, but fresh longs will be initiated on dear Sarkari Bank with fair valuation. Maybe glam doesn't suit me..
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.