Key Player Analysis
In this section we will be discussing three of the major players in the Indian banking industry
namely SBI, HDFC Bank and ICICI Bank. They emerged as the top three banks of 2020 owing
their overnight transformation to serve the Indian consumers. We will be analyzing them on
the basis of their product, output, revenue, performance, etc.
1. Interest rate on savings account: SBI deposit accounts that have a balance of up to
INR 1 lakh are offered an interest rate of 2.75% p.a. and for deposits above the given
amount, the interest rate was reduced from 3% to 2.75% p.a. At the same time HDFC
and ICICI banks are offering a more attractive rate of interest. For amounts below
INR 50 lakhs, ICICI offers 3.25% while HDFC offers 3.5%. For amounts above INR 50
lakhs, ICICI offers 3.75% while HDFC offers 4%.
2. Fixed Deposit (FD) rates: SBI offers an interest rate between 2.9-5.4% on FDs
maturing in 7 days to 10 years. Both, ICICI and HDFC offer interest rate ranging from
2.5-5.5% on deposits maturing in 7 days to 10 years. Additionally, all three banks
under discussion provide 50 base points extra on the deposits to senior citizens.
3. Net Profit Margin: A higher net profit margin indicates better efficiency of a company
at converting its sales into profits. As of March 2021, HDFC bank and ICICI bank
displayed a net profit margin of 24.8% and 20.6% respectively, whereas that of SBI
stood at 8.1%. ICICI bank has shown a steady increase in its net profit margin over
the last two years after a previous decrease. HDFC bank has performed consistently
better compared to its top competitors in the market.
4. Net Interest Margin: Net Interest Margin is one of the key indicators of the
profitability of a bank. It can be affected by a number of factors. For instance,
demand and supply of loans helps determine the market interest rates. The interest
rates significantly affect the net interest margin. For HDFC bank, ICICI bank and SBI,
the net interest margin as of March 2021 was 4.3%, 3.5% and 3.0% respectively. This
does not however indicate one bank being more profitable or efficient than the
other.
5. Non-Performing Assets: NPA indicates the proportion of loans that are in default.
The companies also have a provision for NPA. The lower the NPA, the better it is for
the bank. As of March 2021, the gross NPA for HDFC bank was 1.32% and the net
NPA (gross NPA - provision) was 0.40%. For ICICI bank, the gross and net NPA was
5.33% and 1.24% respectively. For SBI, the gross and net NPA was 4.98% and 1.50%
respectively. HDFC bank looks best in terms of GNPA and NNPA.
6. Return on Equity: ROE is the measure of the ability of a bank to generate profits from
its stakeholders’ equity/investment. HDFC bank has a good ROE track record with
16.51%. It is followed by ICICI bank having ROE of 12.56% and SBI having 9.31%. IN
these terms, the performance of HDFC and ICICI is par excellence.
7. Profit Growth: All three banks have delivered a good profit growth over the last
three years. The profit growth for HDFC, ICICI and SBI has been 21.18%, 33.69% and
72.32% respectively.
It can be observed that the private sector banks, HDFC and ICICI, have fared well compared
to SBI. In terms of bank’s profitability and efficiency, HDFC is far ahead of SBI.