Stock Market

The banking industry is normally thought of as a stodgy and dull field, and bank stocks usually reflect these sentiments. For years, the Indian banking industry was considered a disaster. With huge lines, layers and layers of red tape and bureaucracy, and an old-fashioned mentality that drove clients mad, the system certainly needed to be modernized, and that change finally came. Without living in India and doing business in their banks, it’s almost impossible to know how the modern Indian banking experience compares with the past, but if the charts of two of India’s biggest banks, ICICI and HDFC, India is certainly breaking the mold of stodgy and boring banking, at as far as their shares are concerned.

• HDFC (HDB)’s company profile looks like that of any other bank. They provide loans, offer savings, checking, and ATMs, and offers mutual funds, stocks, and cash management services. When visiting their website, one will notice that it is all in English. In a country that has several official languages, and many more unofficial dialects, English is the common language of business. HDB also offers a similar line of products that most any bank does: financial planning, different sorts of loans, and insurance. One particularly interesting product the bank offers is 99.9% pure gold bars for sale. Gold bars aside, the bank’s stock has been close to pure gold for investors. Over the past year, the price of each share has risen from roughly $75, to around $110.
• ICICI (ICB) is the larger of the two banks, with a market cap of $23.75 to HDB’s 11.7 billion. The bank provides similar services and products as its competitor, offering loans, varieties of corporate and private accounts, insurance, investment opportunities, and online services. Like HDB, the company’s website is in English, and offers a range of products and opportunities. Also like its competitor, ICB has seen its shares rise substantially over the course of the past 10 months. The bank’s shares opened the year at $43 per share, and at the date of this article, closed at $52. Not an enormous gain, but still a very healthy one.

If you compare the two charts, you see that both banks were hit hard by the subprime crisis and sell-offs that occurred last spring, and then the latest round of selling just a few months ago. Still, the two banks have posted terrific gains–close to 60%–over the last year. When you compare the two against two American banking stocks–in this case Wachovia (WB) and Lehman Bros. (LEH)–the gains turn out to be nothing short of spectacular.

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