HDFC Bank [Get Quote], India's second-largest private bank, has overtaken ICICI Bank [Get Quote], the largest private player, in terms of market capitalisation to top the rankings among private banks. 

Among all banks, government-owned State Bank of India [Get Quote] (SBI) still tops the banking sector list with market cap of Rs 84,077 crore.

ICICI Bank, which merged with development financial institution ICICI in 2002, first overtook SBI in the m-cap race on December 16, 2005. It retained the number one slot till January 25, 2008, when the public sector bank regained leadership ahead of its rights issue.

But with the stock markets falling amid the global financial turmoil, ICICI Bank shares have fallen 45 per cent since mid-September. The scrip was one of the worst hit mostly on rumours of heavy exposure to sub-prime instruments. HDFC Bank share prices dropped 17 per cent in the same period.

In fact, HDFC Bank overtook ICICI Bank in the m-cap sweepstakes on October 10, lost the slot and regained it today (<B>see table</B>).

The realignment in market cap rankings by the country's two largest private banks partly highlights the contrast in their growth strategies and how they pan out in troubled times.

For ICICI Bank, the focus has been on aggressive growth in its loan portfolio, which saw it powering ahead with personal, automobile and home loans to borrowers in almost all income levels.  

HDFC Bank, in contrast, grew at a slower pace, focusing more on the quality of its portfolio rather than the size. Managing Director Aditya Puri said, "We always restricted ourselves to the middle and upper-middle income levels. What has fallen out of the demand market is the people at the bottom who had higher interest rates."

 Significantly, ICICI Bank has now decided to go slow on lending. At the start of the year, it had talked of double-digit growth in retail advances. Now projections have been lowered to around 5 per cent.  

In recent months, the bank pulled out of two-wheeler finance at dealerships and stopped offering the post-dated cheque facility for consumer durable purchases. 

HDFC Bank's Puri said he expects growth, which has been in the range of 25 to 30 per cent in recent years, to continue. "Our portfolio is fine and so is our growth momentum. We will see some impact on the SMEs, and the companies, but this impact will be more in terms of a squeeze on the profits rather than the viability," he said.

 HDFC Bank also remains India-focused, though it opened its first overseas branch in Bahrain, Puri said. 

ICICI Bank, on the other hand, has worked on having a global footprint with a presence in the United Kingdom, Canada, Germany, West Asia, Singapore and the US.  At the end of March, 2008 ICICI Bank's international operations accounted for about 25 per cent of its consolidated banking assets, one of the reasons that provoked rumours about its sub-prime exposure.

 HDFC Bank, which merged Centurion Bank of Punjab [Get Quote] with itself in May this year, reported a 43.3 per cent rise in net profit at Rs 527.98 crore for the second quarter ending September 2008. 

Analysts expect ICICI Bank's profits to rise 12 to 13 per cent in the second quarter. The bank will also have to make mark-to-market provisions on investment made by its overseas subsidiaries.