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Apr 17, 2018 04:27 PM IST | Source: Moneycontrol.com

Kotak Mahindra Bank pips SBI to become India’s second most valuable lender

HDFC bank led as the indisputable leader in the banking sector with the market capitalisation of Rs 5.03 lakh crore.

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Kotak Mahindra Bank took second place, ranking below HDFC Bank, as India’s most valuable bank for the first time, beating the largest state-run commercial lender State Bank of India (SBI) on Monday, reported Economic Times.

Kotak Mahindra’s market capitalization touched Rs 2.23 lakh crore on Monday, slightly ahead of SBI’s, which stood at Rs 2.22 lakh crore. HDFC held its position as leader in the sector with Rs 5.03 lakh crore market cap.

Presently, many state-run businesses are focusing on retail businesses and refraining from big-ticket lending since they are going through several issues like bad loans and rising defaulters. Retail banking has always been the place where private banks have flourished.

Rajat Rajgarhia, MD-institutional equities at Motilal Oswal Financial Services, told ET, “While PSU banks, including SBI, are reeling under several issues like non-performing assets and continued equity dilutions, there was a gradual shift by investors from private corporate lenders to private retail lenders, which led their shares touching new highs this year.”

There was a 50 per cent rise in deposit customers with Kotak Mahindra between March and December 2017, when it stood at 1.2 crore. Kotak has been consistent in the rate cycles and analysts have predicted a steady March quarter for the bank as well.

With public sector banks struggling with NPAs and defaulting, the floor has opened up for private banks such as Kotak, to grow and succeed in their market share expectations, a researcher from Sharekhan, Lalitabh Shrivastawa, said.

“On the other hand, SBI, despite its obvious size and market strength, will remain at present valuations for some time because new lows for PSU banks is expected to remain mixed in the medium term. A credit growth pick-up and NPL recovery/reversals would be the key to improvements in valuations for SBI,” he went on to say.

SBI’s shares dropped by 15 per cent in 2017 while Kotak Mahindra has seen an ascent of 33 per cent through the year. Private banks like HDFC and IndusInd saw a growth trajectory of 30 per cent each.
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