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Top 5 Banks With Highest Capital Adequacy Ratio

By Saikat Mitra | 12/28/2012 9:00 PM Friday

Capital Adequacy Ratio (CAR) is defined as the ratio of a bank's capital to its risk. National regulators track a bank's CAR to ensure that it can absorb a reasonable amount of loss and complies with the statutory capital requirements. The CAR determines a bank's capacity to meet its time liabilities and other risks such as credit risk, operational risk, etc. In essence, a bank's capital is its ‘cushion’ for potential losses, and protects the bank's depositors and other lenders. Banking regulators in most countries define and monitor CAR levels to protect depositors, thereby maintaining confidence in the banking system.

Here, we present the top 5 banks in India that have the highest CAR levels.

Top On Capital Adequacy Ratio
Company NameCapital Adequacy Ratio (%)M-Cap (Rs/Cr)YTD Returns (%)
ICICI Bank 18.28 131458 63.32
YES Bank 17.51 16446 100.82
HDFC Bank 17 160626 59.02
Kotak Mahindra Bank 16.4 48263 54.03
Federal Bank 15.79 9238 59.1
Source: Dion Insight, Press Release

ICICI Bank: ICICI Bank and its subsidiaries provide banking and financial services to corporate and retail customers, with operations in 19 countries, including India. As of September 30, 2012, the bank has 2772 branches and 10006 ATMs in the country. It offers commercial banking, retail banking, project and corporate finance, working capital finance, insurance, venture capital and private equity, investment banking, broking and treasury products and services. The bank has witnessed an 18% Year-on-Year increase in advances to Rs 275076 crore (USD 52.0 billion) as of September 30, 2012.

The bank’s CAR stands at 18.28% as of September 30, 2012, which is in line with the RBI’s guidelines on Basel II norms. Its market capitalisation stands at Rs 131458 crore, and the stock has garnered returns of 63.32% on a YTD basis.

YES Bank: YES Bank provides commercial banking and other financial services to corporate and retail customers in India and internationally. Incorporated in 2003, the bank operates through 400 branches in India, 600 ATMs and 2 national operating centres. It witnessed a steady rise in its net interest income (NII) on account of growth in customer assets and relatively steady margins. The NIMs expanded sequentially to 2.9% in Q2FY13. The bank added 19 branches added during Q2FY13. The break-up of its total loan portfolio as on September 30, 2012 was as follows – Corporate & Institutional Banking (Large Corporates) – 67.4%, Commercial Banking (Mid-sized Corporates) – 17.9% & Retail Banking (including MSME) - 14.7%.

As of September 30, 2012, the bank’s CAR stands at 17.51%. The stock has yielded stupendous returns of 100.82% on a YTD basis. Its market capitalisation stands at Rs 16446 crore.

HDFC Bank: HDFC Bank, together with its subsidiaries, provides retail banking, wholesale banking, treasury and other financial services to individuals and business customers in India. As of September 30, 2012, the bank’s distribution network stood at 2620 branches and 10316 ATMs in 1454 cities as against 2150 branches and 6520 ATMs in 1141 cities as of September 30, 2011. The asset quality of the bank remained healthy, with its gross non-performing assets (NPAs) at 0.9% of the gross advances and net NPAs at 0.2% of the net advances as of September 30, 2012.

In accordance with the Basel II guidelines, the bank’s total CAR stood at 17% as at September 30, 2012, against the regulatory minimum of 9%. The market capitalisation stands at Rs 160626 crore, and the scrip has yielded a return of 59.02% on a YTD basis.

Kotak Mahindra Bank: Kotak Mahindra Bank offers banking and financial services to individuals and corporate clients in India. As of March 31, 2012, the company operates a network of 355 branches and 848 ATMs. It provides various lending products comprising commercial vehicle finance, personal loans, home loans and agriculture finance. The bank also has an international presence, with offices in London, New York, California, Dubai, Abu Dhabi, Bahrain, Mauritius and Singapore. The total assets and the net worth of the bank have grown at a CAGR of 39% and 32% in the last 9 years to stand at Rs 92349 crore and Rs 12901 crore respectively.

The bank has a CAR of 16.40% as of September 30, 2012, which is one of the highest in the Indian banking sector. Its market capitalisation stands at Rs 48263 crore. On a YTD basis, the stock has yielded returns of 54.03%.

Federal Bank: Incorporated in the year 1931, Federal Bank operates through a network of 743 branches and 805 ATMs. Formerly known as Travancore Federal Bank, the company changed its name to Federal Bank in March 1947. Federal Bank is the largest and most strongly established private sector bank in Kerala, a state that new private sector banks have found difficult to penetrate. There are early signs of traction in the new management’s transformation agenda, particularly in current account (CA) franchise growth.

The bank has a CAR of 15.79% as of September 30, 2012. This is also one of the highest in the Indian banking sector. The stock has yielded a return of 59.01% on a YTD basis, and the company’s market capitalisation stands at Rs 9238 crore.

 

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