THE LOAN RANGER

RIDING ON THE OVERALL GROWTH IN CREDIT AND ROBUST ASSET QUALITY, HDFC BANK HAS EMERGED AS THE TOP LENDER ON THE BT500 2022 LIST. BUT EVEN AS ANALYSTS ARE BULLISH ABOUT THE SECTOR HEAVYWEIGHT, ITS STOCK SEEMS TO BE UNDER PRESSURE

- ASHISH RUKHAIYAR

A LARGE BALANCE sheet. Strong net worth. Complementary strengths. These are factors that generally excite both market analysts and investors. But strangely enough, they didn’t work for HDFC Bank if its stock price is any indication. Despite that, HDFC Bank is once again the top-ranked lender in this year’s BT500 list—based on the average market cap during the October 2021-September 2022 period.

But let’s start at the beginning. On April 4, 2022, HDFC Bank (No. 3 on the BT500 2022 list) announced that housing finance major HDFC Ltd will be merged into the bank to create an entity “that would allow greater flow of credit into the economy”. This didn’t come as a surprise as the move was widely expected in banking circles. Yet, since April 4, shares of HDFC Bank have lost around 2.6 per cent (till November 18) while the benchmark S&P BSE Sensex has gained 1.74 per cent. The S&P BSE Bankex—the sectoral barometer for banks—is also up 10.16 per cent in the same period, indicating that most banks had a good run on the bourses since April this year.

But for HDFC Bank, the past two years have been rough as its stock underperformed the Sensex by a wide margin. For instance, the Sensex was up nearly 30 per cent in 2021 while HDFC Bank’s shares clocked gains of just 3 per cent. That’s not to say that HDFC Bank—incorporated in August 1994 and which, as on June 30, had nearly 6,500 branches and 19,000 ATMs across 3,226 towns or cities—is a perennial laggard. As recently as 2019, its shares had gained nearly 20 per cent when the Sensex had moved up by around 15 per cent. And that wasn’t the only time when its stock outperformed the BSE in a calendar year.