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SBI vs HDFC Bank: After months of underperformance amid global uncertainty and domestic headwinds, both banking stocks are beginning to show signs of value, according to a recent sector report by Axis Direct.
The brokerage notes that the recent market correction has recalibrated valuations across the sector, presenting selective buying opportunities in large banks. They estimate a potential upside of 26 to 45 per cent across prominent financial stocks.
Nifty Bank Returns
The Nifty Bank Index, which tracks India’s most liquid and large-cap banking stocks, has experienced a sharp decline of nearly 14 per cent in the past month, a weakness that has persisted over the last 3, 6, and 12 months.
| Timeframe | Return % |
| 1 Week | -1.39% |
| 1 Month | -13.86% |
| 3 Months | -14.30% |
| 6 Months | -7.27% |
| YTD | -13.67% |
| 1 Year | -0.09% |
While HDFC Bank and State Bank of India (SBI) dominate the index with substantial weightage, any revival in these major banks could significantly uplift the broader banking sector.
State Bank of India (SBI) VS HDFC Bank
Below is a comparative snapshot of State Bank of India (SBI), the country’s largest public-sector lender, and HDFC Bank, India’s leading private-sector bank, across key operational, financial, and market-related parameters:
– SBI: Antique sees strong growth, stable asset quality
Antique maintains a BUY on SBI with a target price of Rs 1200, implying around 17.7 per cent upside from the current market price of Rs 1019.45.
The brokerage notes that Middle East exposure is limited, with risks only if conflict extends beyond March 2026, mainly impacting MSMEs.
However, the asset quality remains resilient, supported by credit protection. Loan growth is healthy at 11 per cent YTD, with FY26 guidance at 13–15 per cent.
Antique highlights that liquidity is robust, though margins may face pressure from rising deposit costs and competition. Earnings growth remains moderate going ahead.
– HDFC Bank: Attractive Valuations, Growth Outlook
Jefferies maintains a BUY on HDFC Bank with a target price of Rs 1240, implying 65 per cent upside from Rs 751.10 (current market price).
Despite a YTD decline, valuations are attractive at 1.6x P/B and 13x P/E, Jeggeries said. Adding, loan growth is projected at around 13 per cent CAGR (FY26–28), with stable margins and ROE around 14 per cent.
Asset quality remains strong. Merger synergies, deposit growth, and leadership clarity are key triggers, though integration and transition risks persist, according to the brokerage.
| Bank Name | Recommendation | Upside % | Brokerage Name |
| SBI | BUY | Around 18% | Antique |
| HDFC Bank | BUY | 65% | Jefferies |
Q3 Results
| Metric | SBI | HDFC Bank |
| Revenue | 130,590 | 87,067 |
| Interest | 78,783 | 45,821 |
| Expenses | 76,799 | 54,145 |
| Net Profit | 22,176 | 20,691 |
| Profit Before Tax | 30,067 | 26,961 |
| Financing Margin % | -19% | -15% |
| Stock P/E | 11.6 | 15.5 |
| ROE | 17.2% | 14.4% |
| Dividend Yield | 1.56% | 1.46% |
Based on the above, SBI outperforms HDFC Bank on profitability, ROE, and growth metrics, while trading at a cheaper valuation. Its stronger earnings momentum and superior stock CAGR highlight better market performance. HDFC Bank remains stable with solid asset quality, but slower growth and higher valuation make it relatively less attractive in comparison.
Stock Price CAGR Comparison
| Period | SBI | HDFC Bank |
| 10 Years | 19% | 11% |
| 5 Years | 22% | 0% |
| 3 Years | 25% | -2% |
| 1 Year | 31% | -16% |
CAGR (Compound Annual Growth Rate) is the average annual growth rate of an investment or metric over a specific period, assuming the value grows at a steady rate each year.
However, readers should note that HDFC Ltd merged with HDFC Bank in a landmark all‑equity merger, effective July 1, 2023, creating one of India’s largest financial institutions. The merger combined HDFC Ltd’s housing finance business with HDFC Bank’s banking operations, strengthening scale, balance sheet, and cross‑selling capabilities.
| Aspect | SBI | HDFC Bank |
| Profit Growth (5Y CAGR) | Strong at 36.3% | Healthy at 21% |
| Dividend Payout | Stable at 18.2% | Higher at 23.3% |
| Interest Coverage | Low (concern) | Low (concern) |
| Contingent Liabilities | Rs 27,42,584 Cr (high) | Rs 27,80,601 Cr (high) |
| Other Income Contribution | High at Rs 1,99,771 Cr | Significant at Rs 1,50,600 Cr |
| Overall View | Higher growth, slightly higher risk | More stable, consistent performer |
(Source: Screener.com)
Bottom Line
From an overall perspective, SBI offers stronger growth, better profitability, and cheaper valuations, making it attractive for investors seeking higher returns with moderate risk. HDFC Bank provides stability, strong asset quality, and long-term consistency, though at a premium valuation.
And a revival in the State Bank of India and HDFC Bank could act as a key catalyst for a rebound in the Nifty Bank, given their heavy weightage. Improved performance in these leaders may lift overall sentiment and drive broader sector recovery.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions.)
