'Valuation gap between ICICI Bank and HDFC Bank may not widen in short run'

MUMBAI:

The valuation gap between the two major private sector banks – HDFC Bank (post merger of HDFC Ltd) and the ICICI Bank Ltd - may not widen in the short run, said an analyst with LKP Securities.

“Post merger of HDFC and HDFC Bank, we believe, the valuation re-rerating will be delayed factoring margin squeeze,” Ajit Kabi, Banking Analyst at LKP Securities said.

"The impact on the return profile will be keenly watched in the coming period. Hence, in the short run, we don’t see the valuation gap widen between HDFC Bank and ICICI Bank," he added.

According to him, both the banks have performed significantly well since 2-3 years.

“Nevertheless, ICICI Bank has outperformed the sector with improvement in credit quality and growth across verticals. The valuation gap between these two banks have narrowed down,” Kabi said.

Meanwhile the market capitalisation of HDFC Bank on Monday was Rs.9,61,537.76 crore. The face value of the share is Re1 and closed at a price of Rs 1,719.55.

On the other hand, the market capitalisation of ICICI Bank was Rs.6,59,056.25 crore. The face value of its equity share is Rs 2 and the closing price on Monday was Rs 942.


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