Banks - ones that have borrowed less

Banks are growing at a huge pace. But let us assume they don’t grow at all from now. This is a hypothetical case - to find the best banks in the Indian market.

I like companies which have cash surpluses and less (or even better – no debt). But we cannot think of banks in the same way. Banks always have huge borrowings, but small cash reserves. That is their business. Leveraging money is what makes money for banks.

So, as all banks have debts, let us think how many months it would take to repay all debts for a bank if the banks did not grow- i.e profits were stagnant (FY10 numbers). These are the banks that would repay within 55 years. J yes 55 years.

company	reserves	unsecured loans	PE	sales	net profit	NPM(%)
Karur Vysya Bank Ltd.	1565.54	19271.85	12.189775	1757.94	336.03	16.76
YES Bank Ltd.	2749.88	26798.57	19.051723	2369.71	477.74	16.22
Indian Bank	6217.25	88227.66	6.000656	7857.06	1554.99	17.22
Kotak Mahindra Bank Ltd.	4191.78	23886.47	47.318672	3255.62	561.11	14.45
Axis Bank Ltd.	15639.27	141300.22	19.903759	11638.02	2514.53	16.14
HDFC Bank Ltd.	21064.75	167404.44	31.721303	16172.91	2948.69	14.76
ICICI Bank Ltd.	50503.48	202016.6	28.491376	25706.93	4024.98	12.13

(except NPM and PE all are in Crores)

Kotak Mahindra and HDFC Bank were the ones which would repay very early (around 35 years). The 5 others were very close to each other (around 50 years).

My assumption that profits would not grow is not realistic. Also, it is not a good comparison as different banks grow at different rates. Generally private sector banks grow faster than public ones.

My assumption that banks would try to reduce their borrowings is also far from the truth. The banks don’t mind if their debt grows. They only care about having more money at lesser rates and lesser assets (money the bank has lent out or invested) going bad.

My model does not view NPAs at all and they can be a major factor in analyzing banks.

So, please analyze all this while using my viewpoint.