October 4, 2023
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HDFC Bank: Can it become No. 1 from No. 6 globally?
With a market cap of USD146 billion, HDFC Bank now ranks sixth globally, according to the latest data. This feat, according to global investment bank Jefferies, can add a layer to investors’ selection process — HDFC Bank can be stacked up against banks in global portfolios.
So, will it move up the ladder to be in the top three? Yes, if the stock rises 8% annually. But that depends on the interest rates and India’s growth story. For now, the bank has underperformed Nifty 50 in the last one year.
While on the valuation metrics, HDFC Bank is the highest among global top 10, it will also have to grow consistently without compromising on asset quality. Compared to the US and China, India’s banking sector remains robust with multi-year low non-performing loans and a continued demand for credit.
According to Jefferies, only HDFC Bank has delivered over 15% CAGR profits in the past decade. At the global stage, the stock’s returns reflect positivity. However, to climb up on the global valuation ladder, the bank will have to consistently deliver on growth without compromising on asset quality. That’s easier said than done considering a large balance sheet.
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