Top banking stock in India | HDFC Bank vs ICICI Bank vs Kotak Mahindra vs Axis Bank
There is no doubt about the fact that the banking system is the backbone of the economy. And for the economy to grow, banks have to grow. India is the fastest growing economy in the world and it is expected to become 3rd largest economy after USA and China.
It is a young nation with immense growth opportunities. And for India to grow, banks will play a crucial role.
So In this article, we will analyze the top 4 private banks in India which include HDFC Bank, ICICI bank, Kotak Mahindra Bank and Axis Bank. Then we will shortlist the best bank for investment
I have done the analysis on 17 parameters:
- Market cap: It tells you the size of the company. It is calculated as Total shares of the company * latest share price.
HDFC bank is #1 in terms of market cap. Kotak Mahindra is 2nd. It is followed by ICICI bank at 3rd position and Axis bank at 4th position.
2. Interest Income: This is the income of the company from its core business which is to give loans. So banks earn interest on the loan they provide.
HDFC bank is #1 in terms of interest income. ICICI bank is 2nd. It is followed by Axis bank at 3rd position and Kotak Mahindra at 4th position.
3. CAGR Growth in Interest Income for the last 4 years: Now, absolute numbers are good. But you should also know which bank has high growth in interest income.
In terms of CAGR growth in interest income, HDFC bank is #1. Kotak Mahindra is 2nd. It is followed by ICICI bank at 3rd position and Axis bank at 4th position.
4. Total Income: This is the total income of the bank including interest income as well as other income from businesses like brokerage, commission from insurance, income from other subsidiaries, etc.
In terms of total income, ICICI bank is #1. HDFC bank is 2nd. It is followed by Axis bank at 3rd position and Kotak Mahindra bank at 4th position.
5. CAGR Growth in Total Income for last 4 years: Again, absolute numbers are good. But you should also know which bank has high growth in total income.
In terms of CAGR growth in total income, HDFC bank is #1. Kotak Mahindra bank is 2nd. It is followed by ICICI bank at 3rd position and Axis bank at 4th position.
6. Interest Income as % of total income: It is important for a bank to have interest income with maximum share in total income. Because interest income is their core business. Hence, higher the interest income, better it is for the bank.
In terms of interest income as % of toal income, HDFC bank is #1. Axis bank is 2nd. It is followed by Kotak Mahindra bank at 3rd position and ICICI bank at 4th position.
7. Net Interest Margin: This is the difference between the interest income generated by the bank and interest it pays to its depositors. For example, if bank pays an avg interest of 5% to its depositors and charges 8% avg interest on loans then net interest margin would be 3%. Higher the interest margin, better it is for the bank.
In terms of net interest margin, Kotak Mahindra bank is #1. HDFC bank is 2nd. It is followed by ICICI bank at 3rd position and Axis bank at 4th position.
8. Net Profit: This is the final profit for the bank after considering all expenses and bad loans.
In terms of net profit, HDFC bank is #1. ICICI bank is 2nd. It is followed by Kotak Mahindra bank at 3rd position and Axis bank at 4th position.
9. CAGR Growth in Net Profit for last 4 years: Absolute profits are important but you should also know which is the fastest growing bank in terms of net profit.
In terms of CAGR growth in net profit, Kotak Mahindra bank is #1. HDFC bank is 2nd. It is followed by ICICI bank at 3rd position and Axis bank at 4th position.
10. Net Profit Margin%: This is calculated by dividing the net profit with the revenue.
In terms of net profit margin, Kotak Mahindra bank is #1. HDFC bank is 2nd. It is followed by ICICI bank at 3rd position and Axis bank at 4th position.
11. Advances: Advances is basically the loan book. For a bank to grow, its loan book should grow.
In terms of advances, HDFC bank is #1. ICICI bank is 2nd. It is followed by Axis bank at 3rd position and Kotak Mahindra bank at 4th position.
12. CAGR Growth in Advances for last 4 years: It is important to know which is the fastest growing bank in terms of advances.
In terms of CAGR growth in advances, HDFC bank is #1. Kotak Mahindra bank is 2nd. It is followed by Axis bank at 3rd position and ICICI bank at 4th position.
13. ROE: It is the returns shareholders get on their investment. Higher the ROE, better it is. In terms of ROE, HDFC bank is #1. Kotak Mahindra bank is 2nd. It is followed by ICICI bank at 3rd position and Axis bank at 4th position. 14. CASA: It is the ratio of deposits in current account and saving account with total deposits. It is beneficial for the bank to have high CASA ratio as bank do not need to pay any interest on current account and interest on saving account is also very low. High CASA ratio results in higher interest margin for the bank. In terms of CASA ratio, Kotak Mahindra bank is #1. ICICI bank is 2nd. It is followed by HDFC bank at 3rd position and Axis bank at 4th position. 15. GROSS NPA: This indicates how much money of the bank i.e. the loan is in danger of not being paid. A high gross NPA means the bank's asset quality is in bad shape. In terms of gross NPA, HDFC bank is #1. Kotak Mahindra bank is 2nd. It is followed by Axis bank at 3rd position and ICICI bank at 4th position. 16. Net NPA: It is the loan that has been declared a bad loan and the bank will not be able to recover the money. Lower the net NPA, better it is. In terms of net NPA, HDFC bank is #1. Kotak Mahindra bank is 2nd. It is followed by ICICI bank at 3rd position and Axis bank at 4th position. 17. Valuations: We will look at the price to book value which basically means how is the share price of the company with respect to the book value per share. Lower the PB, better it is.
In terms of Valuations, , Axis bank is cheapest. ICICI bank is 2nd chepest. It is followed by HDFC bank at 3rd position and Kotak Mahindra bank at 4th position.
Clearly, “HDFC bank” is the best bank in terms of CASA ratio, NPA, interest coverage ratio, ROE, etc. And “Kotak Mahindra” is the fastest growing bank in terms of interest income, total income, net profit and advances with a low NPA. In terms of valuations, both are trading at higher valuations than ICICI and Axis due to their better performance.
PS: If you want to learn every aspect of fundamental analysis of stock and other important concepts of personal finance, you can explore my video course on "everything about money management".
Disclaimer: This article is only for education purpose. Consult your financial Advisor before investing your money.
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