A tale of two cities: India's newest banks are some of the world's most profitable

AU Small Finance Bank’s return-on-equity hit 56% versus 11% for JPMorgan Chase.

Bloomberg reports that although state banks in India have been wracked by scandals of massive fraud and growing bad loan levels, it’s a vastly different story for up-and-coming lenders who are posting some of the largest returns, easily beating some of the world’s household names in the investment banking scene.

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For instance, AU Small Finance Bank Ltd.’s return-on-equity clocked in at 56% compared with about 15% for China Construction Bank, 11% for JPMorgan Chase & Co. and an average 11.3% across 430 global lenders with a market cap of over $2b.

“India’s banks have had a sharply divided run -- while consumer banks are riding the crest of consumption and strong and good quality credit demand, wholesale banks are saddled with restructuring challenges of the economy,” said Aditya Narain, an analyst at Edelweiss Securities Ltd.

Some of Indian private-sector banks are also amongst the most richly valued as HDFC Bank Ltd. in January became only the third Indian company whose market cap has crossed the $73b (5t rupee) mark and Goldman sees it hitting $100b by 2020.

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