HDFC Bank market cap to touch $100 bn by 2020: Goldman Sachs

It is already the country's most-valued bank at Rs 4,22,700 crore, or about $66 billion

Private sector lender HDFC Bank is likely to cross the $100 billion market capitalisation-mark by fiscal 2019-20, Goldman Sachs said in note. HDFC Bank is currently the country's most-valued bank with market value of Rs 4,22,700 crore (nearly $66 billion).

Doubling of profits to $5 billion (Rs 32,000 crore) by 2020-21 will be the key driver in taking HDFC Bank towards the $100 billion market cap milestone, the brokerage said.

Goldman Sachs expects HDFC Bank's earnings to grow at a compounded annual growth rate of 21 per cent in the next three financial years to 2019-20. It says the bank's latest earnings defied investor concern on growth and profitability.

"HDFC Bank leverages the market share shift from state-owned banks; the retail under-penetration using its large distribution network, highest efficiency among retail peers, and low cost of funds; and a shift of financial savings from deposits to other products. Under our bull case, we see potential for market cap rising to around $137 billion, assuming valuations re-rate closer to one standard deviation above median on potentially higher growth and best-in-class profitability," Goldman Sachs said in a note.

The brokerage said capital issues at state-owned banks and asset quality challenges at large private sector bank are helping HDFC Bank gain market share. Rising retail lending penetration, higher credit card usage following demonetisation is also aiding the bank's growth. Shift of household savings from deposits to other financial products are also leading to fees growth and profitability for the broking business, the brokerage said.

Currently, some of the global banks in the $100 billion market cap club include JP Morgan, China's ICBC, Wells Fargo HSBC and Citibank.

Domestically, HDFC Bank is the third-biggest company in terms of market cap behind Tata Consultancy Services (TCS) and Reliance Industries. Currently, TCS has a market cap of around Rs 496,843 crore ($77 billion) and RIL is valued at Rs 432,408 crore ($67 billion).

In 2013, several brokerages including JP Morgan and CLSA had come out with a note stating TCS could become India's first company to touch the $100 billion market cap mark.