4 Major Private Banks HDFC Bank Vs. ICICI Bank Vs. Axis Bank Vs. Kotak Mahindra Bank Comparative Analysis
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In this blog, we are going to do a comparative analysis of the 4 Major Private Banks i.e., HDFC Bank, ICICI Bank, Kotak Mahindra Bank, and Axis Bank based on its Q1FY22 Results. So, Let’s proceed and check out which Bank has performed well.
Introduction:
The results for the 4 Major Private Banks have been out and thereby we will do a comparative analysis of these banks based on Key Ratios and Asset Quality as of Q1FY22. So, Let’s Begin:
1) Key Ratios- Comparative Analysis:
Under this heading, we will discuss 5 types of Ratios namely Net Interest Margin (NIM), Cost to Income Ratio, Capital Adequacy Ratio, CASA Ratio, and Retail Loan Book % Share.
i) Net Interest Margin:
- Net Interest Margin (NIM) is the difference between the interest earned by the bank and the interest expenses of the bank relative to its interest-earning assets like cash.
- As of Q1FY22, the Kotak Mahindra Bank records the highest Net Interest Margin rate of 4.60% followed by HDFC Bank- 4.10%, ICICI Bank- 3.89%, and Axis Bank- 3.46%.
- The High Net Interest Margin of Kotak Mahindra Bank is on account of the high CASA Book of the bank.
ii) Cost to Income Ratio:
- The Cost to Income ratio of the bank is the important financial efficiency ratio used while analyzing the bank to gauge its operational efficiency.
- The less the Cost to Income ratio of a bank, the better it is considered.
- In this context, HDFC Bank outperforms other banks with the Lowest Cost to Income Ratio of 35% in Q1FY22. The same was 37.2% and 35% in Q4FY21 and Q1FY21 respectively.
- Next to HDFC Bank are ICICI Bank, Axis Bank, and Kotak Mahindra Bank with Cost to Income Ratio of 41.2%, 43.4%, and 43.5% respectively.
- ICICI Bank has registered a significant rise in its Cost to Income Ratio from 37.5% in Q1FY21 to 41.2% in Q1FY22.
iii) Capital Adequacy Ratio (CAR):
- The Capital Adequacy Ratio also termed as Capital to Risk-Weighted Assets Ratio measures the financial strength of a bank as of its capital and assets. This ratio ensures the safety of the depositor’s money and provided a sound efficiency system to the financials of the bank.
- Higher the Capital Adequacy Ratio (CAR), more the conservative approach of the bank.
- Here, Kotak Mahindra Bank is the most conservative and is having a Capital Adequacy Ratio (CAR) of 2.37% as of 30th June 2021.
- The Capital Adequacy Ratio (CAR) of the bank is increasing over the period from 21.2% in Q1FY21 to 22.3% in Q4FY21, and 23.7% in Q1FY22 ensuring greater safety to depositor’s money.
- After Kotak Bank, ICICI Bank has the highest Capital Adequacy Ratio (CAR) of 19.3%. This bank is also on the path of Kotak Bank in terms of increasing this ratio. The Capital Adequacy Ratio (CAR) of the bank was 16% and 19.1% in Q1FY21 and Q4FY21 respectively.
- The Capital Adequacy Ratio of HDFC Bank and Axis Bank are 19.1% and 19% respectively.
iv) CASA Ratio:
- CASA ratio of a bank is the ratio of deposits in current and saving accounts to total deposits.
- Among these 4 Major Private Banks, Kotak Mahindra Bank has the highest CASA ratio of 60.2% in Q1FY22 which was 56.7% in the same quarter of the previous financial year.
- Here again, ICICI Bank books the second spot on the queue with a CASA ratio of 45.9% as of 30th June 2021 showing a strong improvement from 41% as of 30th June 2020.
- After ICICI Bank, the highest CASA Ratio are of HDFC Bank and Axis Bank of 45.5% and 43% respectively.
v) Retail Loan Book (%):
- In the case of Retail Loan Book (%), ICICI Bank outscores other concerned banks with 70.8% of Retail Loan Book.
- Next to ICICI Banks are Kotak Mahindra Bank- 63.3%, Axis Bank- 53.8%, and HDFC Bank- 47%.
- Here, HDFC Bank looks to be shifting towards Corporate Banks as its Retail Loan Book % has decreased from 48% in Q1FY21 to 47% in Q1FY22.
- On the contrary, the Retail Loan Book % share of Kotak Mahindra Bank has increased by 2.3% in a year.
2) Asset Quality- Comparative Analysis:
Under this section, we will do a comparative analysis of the Asset Quality of these 4 Major Private Banks based on its Gross NPA, Net NPA, and Provision Coverage Ratio
i) Gross NPA (%):
- Here, HDFC Bank records the lowest Gross NPA % of only 1.47% as of Q1FY22 against 3.56% of Kotak Mahindra Bank, 3.85% of Axis Bank, and 5.15% of ICICI Bank.
- All these banks have registered growth in Gross NPAs in the first quarter of FY22 as compare to the first quarter of FY21.
ii) Net NPA (%):
- In the case of Net NPA also, the HDFC Bank reports the lowest figure of 0.48% in Q1FY22.
- While Kotak Bank has the highest Net NPA% among these banks of 1.28%.
- The Net NPA% of the other 2 banks are Axis Bank- 1.20% and ICICI Bank- 1.16%.
iii) Provision Coverage Ratio (PCR):
- With the highest Provision Coverage Ratio of 78.2%, ICICI Bank reserves its first position in the comparisons among the Top-4 Major Private Banks.
- Kotak Mahindra Bank records the lowest Provision Coverage Ratio of 64.8% among these 4 banks.
Final Remarks:
- As per the above discussion, Kotak Mahindra Bank and HDFC Bank lead with the joint highest 3 tick marks on the concerned parameter.
- Whereas ICICI with 2 green tick marks on Retail Loan Book % Share and Provision Coverage Ratio follows HDFC Bank and Kotak Mahindra Bank.
- Axis Bank here performs the weakest.
