Wednesday, November 16, 2011

HDFC Bank is no 1

It's no 1 in market cap, not asset size, ET reports.  That is quite an achievement considering that it is only one sixth the size of SBI. HDFC Bank's performance vindicates one of the themes I have consistently propounded over the years, namely, that asset size is not crucial to performance and, therefore, the quest for consolidation in India's commercial banks is misplaced (although there is a case for it in the cooperative banking sector). HDFC Bank did not turn into a stellar performer recently; it was among the best performers in Indian banking when it had an asset size of Rs 50,000 crore. It had one of the highest net interest margins in the business while having only around 300-400 branches. It has delivered profit growth of 30% every quarter for years now.

HDFC Bank is representative in many ways of what might be called the 'Indian banking model. In this model you stick to the basics: retail deposits, managing credit risk, staying away from fancy structured products and concentrating on the home market. Do a good job of this and you will be in the front rank of international banks as the Indian economy booms for another 10 years or so. If a bank is attempting something else, one needs to be wary. Why would you attempt something fancy when the simple works- as in the case of HDFC Bank?


Vikram said...

I dont know much about banking, but there was a comment in the article you linked about SBI having commitments to rural banking, while HDFC doesnt have such commitments. In a talk by P. Sainath, he mentioned how the withdrawal of the banks from rural India was one of the reasons why access to credit had reduced and farmers were put in a financial fix.

I dont think its fair to compare a private sector back with no rigorous social commitments to a bank like SBI that provides rural credit.

Ishaan M said...

Pantaloons is working for a charitable cause. Here's the link for details

Spread the Word for someone's good!

steroids online said...

Informative articles and news, great to read all the responses and input, thanks for your contributions and opinions.

Anonymous said...

What you say after recent expose. Who knows these deposit are only hot money which is reflecting in their balance sheet. It is just impossible to grow @ 20%-30% YoY for prolong period.

There are numerous scam happended globally which warn us again and again that no company can grow from prolong period of time. who knows what is behind the HDFC curtain.Some time it is really surprise when most of other banks are suffering (Even old private sector Banks) how HDFC can perform??