Strategicanalysishdfcbank 170924193215 PDF

CHARVI PANDEY
AAYUSHI SRIVASTAVA
RAVI KUMAR
SHAGUN JHALANI
NAV KRISHNA CHAUDHARY
KAINESH PATEL
MILAN SHAMBHARKAR
1
Macroeconomic Analysis
Demographic
• Increase in population helps in increasing the total number of accounts
Socio Cultural
• Increasing literacy rate
Technological
• Volume of transactions is increasing with the increasing internet penetration and smartphone users
Economic
• Increase in GDP leads to increase in NIM and increase in inflation leads to decrease in NIM
Regulatory
• Scheduled commercial banks have to open 25% branches in tier 5 and tier 6 cities and bank licences are not available on
tap
Number of Accounts vs Population No. of Bank Accounts vs Literacy rate

1,600 1,600
Millions
Millions
1,400 1,400
y = 6.0168x - 7E+09
Number of Accounts
1,200 y = 9E+09x - 5E+09

R² = 0.9328 1,200
R² = 0.8815
1,000
1,000
800
600 800
400 600
200 400
-
200
1,100 1,150 1,200 1,250 1,300 1,350
Population -
Millions
62.00% 63.00% 64.00% 65.00% 66.00% 67.00% 68.00% 69.00% 70.00% 71.00% 72.00% 73.00%
Literacy rate
2
Macroeconomic Analysis
Online Transactions vs Smartphone Users NIM vs GDP Growth rate

2000 4.00%
Millions
1800
y = 7.7827x + 5E+08 3.50%
1600
R² = 0.8538
1400 3.00%
1200
2.50%
1000
800 2.00% y = 0.0973x + 0.0213
R² = 0.2522
600 1.50%
400
1.00%
200
0 0.50%
0 50 100 150 200
Millions 0.00%
0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00%
NIM vs Inflation
4.00%
3.50%
y = -0.05x + 0.0329
R² = 0.1153
3.00%
2.50%
2.00%
1.50%
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%
3
Industry Performance Parameters
NPAs as % of Total Loans Net Interest Margin ROE

8 4.00% 16
7 3.50% 14
6 3.00% 12
5 2.50% 10
4 2.00% 8
3 1.50% 6
2 1.00% 4
1 0.50% 2
0 0.00% 0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2011 2012 2013 2014 2015
Loan/Deposit ratio ROA

6 1.2
5 1
4 0.8
3 0.6
2 0.4
1 0.2
0 0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2011 2012 2013 2014 2015 2016
4
Industry Analysis
Growth in Credit off-take (USD Bn) Growth in Deposits (USD Bn)
1600 1479
1200 1466
1016 1400 1342 1313 1349
984 969 994 983
1000 1174
864 1200
800 977
684 1000
819 857
587 602
600 800
428 597
600 495
400
400
200
200
0 0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Interest Income Growth Other income growth in indian banking sector

120 110.74 14
103.4 102.88 12.39
102.17
100 12 10.7 10.8
10.2 10.5
10
76.4 10 8.9
80
67.1
57.6 8 6.7
60 5.9
6 5.3 5.5
34.12 4.3 4.3
40 28.7 30.65 31.38 3.7
4 3.1
17.9 18.2 20.2 2.1 2.3 2.3 2.1 2.2 2.4
20 2
6.4 5.8 5.9 7.68 7.78 7.6 8.26
0 0
2009 2010 2011 2012 2013 2014 2015 2009 2010 2011 2012 2013 2014 2015
Public Private Foreign Public Private Foreign

5
Industry Analysis
ROA Net Interest margin over years

2.5 4.00%
3.53%
3.50% 3.38%
2 3.08% 3.03%
3.00% 2.87%
2.74%
2.64%
2.47% 2.54%
1.5 2.44%
2.50%
2.00%
1
1.50%
0.5
1.00%
0 0.50%
SBI & its associates Nationalised bank Public sector banks Private sector banks Foreign banks
0.00%
2012 2013 2014 2015 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
6
Industry Analysis – Porter’s Five Forces
Commercial bank branches (per 100,000 adults) HNI as % of total accounts Bargaining buyer of suppliers:
Moderate
16 0.02
• Investors who are ready to bear
0.018
14 high risk have higher return
0.016
12
options like equity and real
0.014 estate while risk averse investors
10 0.012 prefer banks.
8 0.01 • The reach of banks is widest
0.008 amongst the different
6
0.006 instruments.
4 0.004
2 0.002
0
0
2009 2010 2011 2012 2013 2014
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Threat of new entrants: Low

• Threat of new entrants is controlled by RBI giving
licences and it is not controlled by market forces (only
2/25 applicants were granted in 2014).
• INR 500 crore is required to open a bank.
• Economies of scale – supply side and demand side
benefits are significant.
• There are incumbency advantages irrespective of size.
• Switching costs are moderate (in terms of effort and
time).
7
Bargaining Power Of Buyers:
Buyers
Corporate Retail
Large Corporates(High) HNI (High) Middle (Moderate) Low (Low)

SME (Low) MME(High-Med)
No of branches/sq. km. (Lending - Repo) rate

0.04 8
0.035 7
0.03 6
0.025 5
0.02 4
0.015 3
0.01 2
0.005 1
0 0
2004 2006 2008 2010 2012 2014 2016 2018 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
8
Threat of Substitutes: Moderate Competitive Rivalry: High

• Real Estate, Gold, Bonds, Equity, hybrid financial Exit Barriers – very high
instruments Product differences – corporate and retail and fee vs non-fee focus
Deposit Side – equity returns are higher than banks, Gold
returns have also been higher and culturally are investing
No of
in gold and real estate as they provide tangible feel to an
No of branches/s
asset.
Year branches q. km.
Lending Side – Retail borrowers do not have many
substitutes. Corporate borrowers have the options of 2005 70373 0.02140949
corporate bond markets. 2006 72072 0.02192638
2007 74653 0.02271159
Risk vs Return of various instruments 2008 78787 0.02396927
40 2009 82897 0.02521965
35
Equity 2010 88203 0.02683389
30 2011 94019 0.02860329
Risk asscociated
25 2012 102377 0.03114603

Real estate
20 2013 109811 0.03340767
Gold
15 2014 112375 0.03418771
10 2015 113144 0.03442166
5 2016 114665 0.03488439
0 FDBonds
0 2 4 6 8 10 12 14 16
-5
Average Returns in Last 5 years
9
Competitive Analysis – Strategic Group
HDFC Bank’s nearest competitors:

• Strategic Group (Basis ROE vs Profit/Employee (Rs. MM)):
• HDFC Bank
• ICICI Bank
• Kotak Mahindra Bank
Strategy: Retail (high income classes) & Corporate Banking
• Outside Strategic Group:

• State Bank of India
Strategy: Major Retail presence in rural and low end segments of
society + Corporate Banking
Submitted to Prof. K.C. Balodi 10

Total Income Cost of Funds

250,000.00 120,000.00
Total Income (Rs. Crore)
Cost of Funds (Rs. Crore)

100,000.00
200,000.00
80,000.00
150,000.00
60,000.00
100,000.00
40,000.00
50,000.00
20,000.00
0.00 0.00
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
HDFC Bank ICICI Bank Kotak Mahindra Bank SBI HDFC Bank ICICI Bank Kotak Mahindra Bank SBI
SGA Net Income

35000 16,000.00
30000 14,000.00
Net Income (Rs. Crore)

12,000.00
SGA (Rs. Crore)
25000
10,000.00
20000
8,000.00
15000
6,000.00
10000 4,000.00
5000 2,000.00
0 0.00
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
11
Total Assets Current Assets

2,500,000.00 2,500,000.00
Current Assets (Rs. Crore)

2,000,000.00
Total Assets (Rs. Crore)
2,000,000.00
1,500,000.00 1,500,000.00
1,000,000.00 1,000,000.00
500,000.00 500,000.00
0.00 0.00
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
Deposits Total Stockholder Equity

2,000,000.00 160000
Total Stockholder Equity (Rs. Crore)

1,800,000.00 140000
1,600,000.00
120000
Deposits (rs. Crore)
1,400,000.00
100000
1,200,000.00
1,000,000.00 80000
800,000.00 60000
600,000.00
40000
400,000.00
20000
200,000.00
0.00 0
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
12
Net Interest Margin (%) EPS

6 250
5
200
Gross Margin (%)
EPS (Rs.)
150
3
100
2
50
1
0 0
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
CRAR CASA
25.00 60.00
50.00
20.00
40.00
15.00
30.00
10.00
20.00
5.00 10.00
0.00 0.00
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2010-11 2011-12 2012-13 2013-14 2014-15
HDFC Bank ICICI Bank Kotak Mahindra Bank SBI Submitted to Prof. K.C. Balodi HDFC Bank ICICI Bank Kotak Mahindra Bank SBI 13
Profitability Analysis Efficiency in Deployment of Assets
25.00% 25 2.50%
Millions
20.00% 20 2.00%
Total Assets (Rs. MM)

15.00% 15 1.50%
10.00% 10 1.00%
5.00% 5 0.50%
0.00% - 0.00%
All Banks SBI HDFC Bank ICICI Bank Kotak Mahindra Bank SBI HDFC Bank ICICI Bank Kotak Mahindra Bank
NIM (%) COF (%) ROE (%) Total Assets (Rs. MM) ROA
Bankwise Online Transactions/Total Income Size vs Profit/Employee

350 250 1.8
Online Transaction Volume/Total Income ($ MM)
Thousands
1.6
300
200 1.4
250
1.2
150
(Rs. MM)
200 1
0.8
150 100
0.6
100
50 0.4
50 0.2
- 0
-
SBI HDFC Bank ICICI Bank Kotak Mahindra
SBI HDFC Bank ICICI Bank Citi Central Canara Bank of PNB Kotak IndusInd Yes Bank Standard
Bank
Bank of Bank Baroda Mahindra Bank Chartered
India Bank Bank
# of Branches+Offices # of Employees
Submitted to Prof. K.C. Balodi
NEFT RTGS ECS Mobile Profit/Employee (Rs. MM) 14
Level of Digitization Fee vs Float Income

300 2,000
Thousands
Millions
1,800
250
1,600
1,400
200
1,200
150 1,000
800
100
600
50 400
200
- -
SBI HDFC Bank ICICI Bank Kotak Mahindra Bank SBI HDFC Bank ICICI Bank Kotak Mahindra Bank
Mobile Transactions Online Txns Core Fee Income (Rs. MM) Interest Income (Rs. MM)
NPA
4.50% 25
Millions
4.00%
3.50% 20

3.00%
15
2.50%
2.00%
10
1.50%
1.00% 5
0.50%
0.00% -
SBI HDFC Bank ICICI Bank Kotak Mahindra Bank
Total Assets (Rs. MM) ROA GNPA Ratio

Key Success Factors – HDFC Bank
Focus on Technology and Digitization Better corporate governance:

Technological Leadership
• Beyond Internet Banking, Mobile Banking and ATM • Merit based lending to have lower NPAs (Better risk
Internal Policies
•
Governance &
Online Loan Approval management and audit and compliance)
• Mobile Banking without Internet • This will lead to higher crediting rating of bank and that will
Corporate
• Opening Accounts Online lead to lesser borrowing rate
• Online Tax Filing
• Humanoids(to capture more data, lower cost and speed up) Right People:
• Analytics • Recruiting and Training
(Info: HDFC netbanking offers 200 services and there are 180% • Career Management
increase in users over previous years. HDFC banks charges fees • Employee and customer engagement
if cash transactions are done.) • Rewards
• Code of Ethics and Business Conduct
Why to focus on technology?
• Higher mobile and internet penetration
• Lower cost of data plan
• Shift from brick and mortar retail to e-retail
Balancing across dimensions
• Rural vs Urban
Segment Focus
Wide Range Offerings/ Value Added Services: • Rural households are 68% of total households,
Product Suites
• Demat Account/ Mutual Funds • Right mix of product, technology and service support
• Insurance • Kisan Gold Credit Card, Kisan Tez (instant loan
• National Pension Scheme/ Atal Pension Yojana approval), Kisan Dhan Shakti account
• 16 lakhs Jan Dhan accounts(highest in private sector by • Large Corporates vs SMEs
HDFC) • Provide a services ranging from working capital loan, term
• Flights, Hotel Bookings and other shopping finance, trade services, cash management, investment
• Kisan Dhan Vikas Kendra(app for farmers) banking services, forex, salary account tie-ups
• Phone Recharge directly by giving a missed call • Government Tieups
• Free soil check up for farmer account holders • Tax collection - direct, indirect, excise, state tax
16
Opportunities - HDFC Bank
Disposable Income (in Millions) Agriculture, Forestry and Fishing (Rs. in Billion)
16 16200
Millions
14 16000
12 15800
10 15600
15400
8
15200
6
15000
4 14800
2 14600
0 14400
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1
2011 2
2012 20133 2014 4 2015 5
• Household disposable income- in rural India is forecasted to grow at a CAGR • Indian agriculture, forestry & fishing sector has grown at a fast pace,
of 3.6 per cent over the next 15 years clocking a CAGR of 8.13 per cent over FY09-16
Retuns Across Asset Classes Smartphone Users (MM)

250
40.0%
30.0% 200
20.0% 150
10.0%
100
0.0%
2011 2012 2013 2014 2015
-10.0% 50
-20.0%
0
Equity Returns Real Estate Returns Bond Returns Gold Returns FD Return 2011 2012 2013 2014 2015 2016
• Under banked as a nation, people with wealth keep money in gold and real • Mobile and Internet penetration is increasing day by day
estate
• Submitted
Local money-lending practices involve interest rates well above 30 per to Prof. K.C.
cent, therefore Balodi
making bank credit a compelling alternative 17
Threats - HDFC Bank
• Rise in use of Mobile Wallets
• Rise of awareness of customers for equity markets or bonds

• Cumbersome legal process, state directed lending requirements
• Politically motivated government process
18
Vision: Analysis of Strategic Intent - Core Values (Core Ideology)
Ethical standards &

professional Integrity
Corporate governance
Customer Focus &

Customer driven
People & Sustainability

Vision: Analysis of Strategic Intent – Core Purpose (Core Ideology)
Core Purpose
“To build sound customer franchises across

distinct businesses so as to be the preferred
provider of banking services for target retail
and wholesale consumer segments”
Vision: Analysis of Strategic Intent – BHAG (Envisioned Future)
BHAG
To increase
market share to To have branches
To grow at 30% in 50% (from 80+ to 10,000 by 2020
To be in top 100
terms of deposits banks) by 2020 in (with 75 % located
banks globally
and loans. terms of loans, in rural and semi-
deposits and urban branches)
credit car lending.
21
Vision: Analysis of Strategic Intent – Vivid Description (Envisioned Future)
Vivid Description
I dream of every Indian to own their homes.

- Hasmukh T. Parekh
(Founder and Padma Bhushan Awardee)
Background:
Now:
• No home loans in 1990s.
Home loan approval in 24 hrs.
• Only good time to buy homes was post retirement – due to
with multiple banks and
gratuity and EPF payment received.
NBFCs willingness to offer.
• High cash component up to 70% in purchase of houses.
22
Mission: Analysis of Strategic Intent
Mission
“To provide financial and banking services in urban, semi-urban and

rural areas with the help of geographical presence and technology to
individuals and corporates. To be one-platform stop for all their financial
needs by offering suitable product offering depending on customer
segments. To provide services at competitive rates by leveraging the
use of technology and maintaining low cost of funds and discipline
credit risk management.”
23
Mission: Components
Attributes Values
Target customers and markets MNCs, SMEs, Salaried class, Business-men, High Net Individual, NRIs, farmers.
(All)
Retail, Wholesale Banking and Treasury
Principal products/services Accounts & Deposits, Loans, Cards, Demat, Investments, Insurance, Forex,
Premier Banking, Private Banking.
Geographic domain Urban, semi-urban and rural areas in India.(Bharat and India)
Urban: 2056, Semi-urban:1439 and Rural: 1025 (55% of branches are in smaller
towns and villages)
Cities/Towns covered:2,587 (out of 8500)
Core technologies Phone Banking, Internet Banking, Electronic Payments, Cards, SMS Banking,
CBS
Expression of commitment to survival, growth and profitability High focus on Corporate Governance and internal policies, risk policies and
measurement
Key elements in company philosophy Customer centric, High on technology

Self-concept Superior corporate governance, high ethical standards
Desired public image We understand your world. Fast and simple. Do more. Bank for family. High on
functional and emotional attributes.
24
Product Suite : Launch Trend
ROBOT
CREDIT VALUE
INTERNATIONAL GOLD DEPLOY-
FIRST ATM CARD ADDED
DEBIT CARD LOAN MENT AT
BUSINESS APPS
BRANCHES
1998 2001 2015
1999
2012 2016
2000 2003 2016
2000
NA 2016
Trends in Internal Environmental factors
1. BRAND
HDFC bank is the highest valued brand in India

2. EMPLOYEES
• Profit per employee is higher than other banks in its strategic group indicating that each employee at HDFC Bank
handles a larger proportion of its business
• Expenditure on employees (on training, salaries and bonuses) as a percentage of total expenditure is highest for
HDFC bank
3. TECHNOLOGICAL CAPABILITY
Online transactions as a percentage of total Bankwise Online Transactions/Total Income

income 250
Online Transaction Volume/Total Income ($

30000 200
25000
150
20000
MM)
100
15000
50
10000
-
5000 SBI HDFC ICICI Bank Central Canara Bank of PNB Kotak IndusInd Yes Bank Standard
Bank Bank of Bank Baroda Mahindra Bank Chartered
India Bank Bank
0
2011 2012 2013 2014 2015 NEFT RTGS ECS Mobile
Technological expertise enables HDFC bank to become a leader in the number of online transactions taking
place annually as a percentage of its annual income.
4. CORPORATE GOVERNANCE NORMS &

5. MERCHANT TIE-UPS
PRACTICES
CORPORATE GOVERNANCE RANKS
• HDFC Bank – CGR 1

• Andhra Bank - CGR 2
• Punjab National Bank – CGR 2
• Bank of Baroda – CGR 2
Corporate governance data of only 19 companies has been

made public; HDFC bank was the 1st bank to get a corporate
governance rating
• Best corporate governance award by Indian banking After SBI, HDFC bank has the highest number of POS
association terminals indicating strong merchant tie-ups
• Award for Best corporate governance practice by BSE
VRIO Framework: Competitive Advantage
SUSTAINABLE
Value Chain Analysis
FIRM INFRASTRUCTURE : Mobile payment platform, Two-factor Core Competencies

authentication, Mobile Banking, RFID, Speech enabled IVR, Biometric 1. Market leader in online transactions
Authorization for Vehicle Loan Approval by leveraging customized ERP
integrations to high-end SAP certified
HUMAN RESOURCES : Performance Management Process, Training solutions
and Development programs, Performance Linked Plans, Employee Stock 2. Employee equity by leveraging
Options performance management system
and T&D programs to maximize
TECHNOLOGY : MPLS Technology, SOA, P2P Payment Solution, Risk business per employee
Intelligence Management System, Outsourcing, ATMs, Mobile Banking, 3. Brand equity because of high
quality service and relationship
Phone Banking, Partnership for IT Policy, Six Sigma Norms, SMAC
management
4. Extensive merchant tie-ups to offer
INBOUND
OPERATIONS
OUTBOUND MARKETING
SERVICE best-in-class customer service
LOGISTICS LOGISTICS AND SALES
5. Offer an exhaustive product suite
• Extensive network • Customer •High Quality •Knowledge •Phone Banking with highest returns in the market
of retail/corporate Database; Customer Banking, •SMS and e-mail
branches, online • Faster turn Relationship •Less focus on •Online Banking
6. Offer greater customer choice,
banking and around time; Management;
ATMs to facilitate advertising(only Platforms flexibility and convenience to increase
• Dedicated trade •Customized 1.45% of total
deposits and desk for handling the retail business
loans; trade
Products suite expenses vs
• High skilled transactions; sold through 17.82% for 7. Disciplined credit monitoring and
human capital sales ICICI Bank)
• Specialized
managers;
strong culture of corporate
advisory team for
catering to SME; •Disciplined governance
• Credit monitoring Credit Risk
for advances Management
31
Distinctive Competencies
Mobile banking volumes rise faster value keeps apace

2000
1721
1. Market leader in online transactions because by 1500
leveraging customized ERP integrations to high-end 1041
1000 965
SAP certified solutions
500 317 560
214 151
32 115
0 64 37
2. Disciplined Credit Monitoring and strong culture of 0
corporate governance
VOLUME (000) VALUE ($ million)
3. Brand equity because of high quality service and

relationship management
HDFC’s Internet And Mobile Transactions
80%
4. Employee equity by leveraging performance 68%
70%
management system and T&D programs to maximize 60% 55%
business per employee 50% 44%
40%
5. Extensive merchant tie-ups to offer best-in-class
30%
customer service 20%
10%
6. Offer greater customer choice, flexibility and
0%
convenience to increase the retail business 2013 2014 2015
32
NPA
4.50% 25
Millions
4.00%
3.50%

leveraging customized ERP integrations to high-end 3.00%
SAP certified solutions 2.50%
15
2.00%
10
2. Disciplined Credit Monitoring and strong culture of 1.50%
1.00%
efficient corporate governance 5
0.50%
0.00% -
3. Brand equity because of high quality service and SBI HDFC Bank ICICI Bank Kotak Mahindra Bank
relationship management Total Assets (Rs. MM) ROA GNPA Ratio
CORPORATE GOVERNANCE RANKS

4. Employee equity by leveraging performance
management system and T&D programs to maximize • HDFC Bank – CGR 1
business per employee • Andhra Bank - CGR 2
• Punjab National Bank – CGR 2
5. Extensive merchant tie-ups to offer best-in-class • Bank of Baroda – CGR 2
customer service Corporate governance data of only 19 companies has been made
public; HDFC bank was the 1st bank to get a corporate
governance rating
convenience to increase the retail business
33
1. Market leader in online transactions because by

leveraging customized ERP integrations to high-end
2. Disciplined Credit Monitoring and strong culture of

efficient corporate governance

CUSTOMER SERVICE INDEX

management system and T&D programs to maximize 95% 98%
CUSTOMER SERVICE INDEX

100% 86%
79%
business per employee 80% 62%
60%
5. Extensive merchant tie-ups to offer best-in-class 40%
customer service 20%
0%
6. Offer greater customer choice, flexibility and 2010-11 2011-12 2012-13 2013-14 2014-15
34




management system and T&D programs to maximize
business per employee

customer service

35




management system and T&D programs to maximize
business per employee

customer service

36
Distinctive Competencies Retail Deposits/Total Revenue

7
leveraging customized ERP integrations to high-end 5
SAP certified solutions 4
2
2. Disciplined Credit Monitoring and strong culture of 1
efficient corporate governance 0
2011 2012 2013 2014 2015 2016
3. Brand equity because of high quality service and SBI ICICI HDFC
ATM to Branch Ratio is 3:1
14000
4. Employee equity by leveraging performance 11256 11766
12000 10743
management system and T&D programs to maximize 10000 8913
business per employee 8000

6000 4014
2558 3046 3408
4000
5. Extensive merchant tie-ups to offer best-in-class 2000
customer service 0
2012 2013 2014 2015
YEARS
convenience to increase the retail business Branches ATMs
37
Competitive Analysis: Assumptions
HDFC KOTAK MAHINDRA ICICI SBI

• Growth – 7.8% for 2016-17
• Oil prices >$50.00 • Increase in FDI limit •volatile financial
• Inflation around or less than
5-6%, • Entry of 20-30 new and sectors where markets,
• Major push toward banks (payment, automatic route is •Growth in global
domestic investment by the small finance and allowed economic markets,
government and revival of through on tap • Implementation of growth above 7.5%
rural economy by increase license) in a short bankruptcy code •Plateauing of stressed
in capital assets in banks
time
• Expenditure increase in
consumption expenditure • Accommodative policy •Weather events will
because of higher outlay on by RBI, stability in turn favourable (El-nino
social sector programmes GDP conditions existed in
and 7th pay commission present year)
• Causes of concern –
• Power sector reforms & •Opportunities for banks
liberalization of FDI norms low capacity industry
utilization, over in offshore wind,
• Weakness in private coastal shipping,
investment and asset leveraged position of
quality strain in banking will balance sheet capital goods, railways,
prevent full fledged defence and housing.
recovery in growth
• Worsening NPA in •Decline in inflation
• Risks are present in form of
banking sector, power leading to increase in
wider emerging markets sector reforms are consumption, passage
slowdown and likely expected. of bankruptcy law,
volatility in global financial accommodative policy
markets
stance by RBI.
38
Competitive Analysis: Strategic Group
Total Assets Current Assets

2,500,000.00 2,500,000.00
Current Assets (Rs. Crore)

Total Assets (Rs. Crore)
2,000,000.00 2,000,000.00
1,500,000.00 1,500,000.00
1,000,000.00 1,000,000.00
500,000.00 500,000.00
0.00 0.00
Net NPA Wages/Total expense

4.50 25.00
4.00
20.00
3.50
In Percent
3.00 15.00
In Percent
2.50
10.00
2.00
1.50 5.00
1.00
0.00
0.50
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
0.00
Axis Title
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
39
Competitive Analysis: Strategic Group
Business per Employee Business per office

160.00 4500
140.00 4000
120.00 3500
Rs in Million
100.00 3000
In million
80.00 2500
60.00 2000
40.00 1500
20.00 1000
0.00 500
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
0
Axis Title 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
Cost of Funds
9.00
8.00
7.00
6.00
In Percent
5.00
4.00
3.00
2.00
1.00
0.00
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
Axis Title
HDFC Bank ICICI Bank Kotak Mahindra Bank SBI
40
Leadership Team BRAND
NATIONAL GEOGRAPHIC Aditya Puri HIGH LEVERAGE OF
PRESENCE
Best Indian CEO, 2015 DIGITAL TECHNOLOGY
By Business World
WIDE PRODUCT
OFFERINGS CORPORATE GOVERNANCE
STRENGTHS
MOTIVATED WORKFORCE
CUSTOMER SERVICE
LOWER FUNDS COST
Weakness
HDFC cannot enjoy first mover Since it’s non nationalized bank,
advantage in rural areas. Other many government key accounts
major competitors like SBI, ICICI like GOI, state governments. Tax
and other nationalised banks have departments, excise departments,
huge penetration for a very long PSUs are held by SBI or similar
time. Rural people are hard core PSBs.
loyals in terms of banking services
Weaker support by both national
government, RBI and
international govt. for
international branch expansion.
SBI and EXIM has always been
given preferences.

Corporate Strategy
RELATED
HORIZONTAL
DIVERSIFICATION
ORGANIC
INORGANIC EXPANSION
ATTEMPTS
43
Ansoff Extended Matrix
GLOBAL PUREPLAY GLOBAAL RETAIL/COMMERCIAL GLOBAL UNIVERSAL
Global
MULTI-COUTRY PURE PLAY MULTI-COUNTRY MULTI-COUNTRY UNIVERSAL

RETAIL/COMMERCIAL
Market
Multi-country
LOCAL PURE PLAY LOCAL RETAIL/COMMERCIAL LOCAL UNIVERSAL
Local
Pure Play Retail/Commercial Universal

Product
Strategic Motives for Diversification - Related
Value
Creation Value Neutral
Market Power–
Pooled Defensive Strategy –
Economies of Threat to small players
Scope negotiating
power due to mature product line
Operation Corporate
Relatedness Relatedness
• Network Effect with more service outlets

provides differentiation • Transferring Skills
• Economies of Scale lower costs by • Large customer database provides for better
• Efficient Capital Allocation customer insights and learnings
• Improved Asset-Liability management
• Sharing value chain activities provides cost
savings
• Advertising
• Product Developments
• Treasury
• Sharing value chain activities provides
differentiation
• Large customer database results in
better data mining 45
Elements Of Strategy –
Product:
• Loan products: Auto loans, Personal loans, Geography: India
Home loans/Mortgages, Commercial Vehicle
Finances, Retail business banking, Credit
Cards, Loans against gold, 2- Arenas Core Technologies:
wheeler/consumer durable loans,
Construction Equipment Finance, Loans • MPLS Technology, SOA
against securities, Agri and Tractor loans, • P2P Payment Solution, Risk
Education Loans, SHG loans, JLG loans, Kisan Intelligence Management
Gold Card System,
• Deposit Products: Savings and Current
Economic
Staging Logic Vehicles • Outsourcing, ATMs, Mobile
accounts, Fixed /Recurring accounts,
Corporate Salary accounts.
Banking, Phone Banking,
• Commercial Banking: Working capital, Term Partnership for IT Policy, Six
loans, Bill/Invoicec discounting, Forex & Sigma Norms, SMAC
Derivatives, Wholesale Deposits, Letters of
credit, Guarantees. Differentiators
• Investment Banking: Debt capital markets, Value Creation Stages:
Equity capital markets, Project Finance, M&A • Branches, ATM’s,
and advisory. Treasury: Foreign Exchange, • High skilled human capital,
Debt securities, Derivatives, Equities. customer database,
• Transactional Banking: Cash Management,
Custodial Services, Clearing bank services,
• Credit Monitoring of high
Correspondent banking, Tax collections, Market: quality,
Banker to public issues, • Large corporate, Medium/Emerging • Customer relations
• Other products: Depository accounts, corporates, Financial Institutions, Management, Customized
Mutual Fund sales, Private Banking, product suites, Phone
Government/PSU’s, Supply chain,
insurance sales, NRI services, Bill payment banking, SMS banking, Online
services, POS terminals, Debit cards, Foreign Agriculture, Derivatives
Exchange services, Broking (HDFC securities). • Retail Clients banking
46
Branch and ATM Coverage

14000
12000 11766 12000 Arenas

11256
10743
10000
8913
8000
6000 Economic
5471 Staging Logic Vehicles
4232 4520
4000 4014
3295 3062 3403
2544
2000 1605 1977 1725 1986
1147 1323 1412
479 732 910 467 535 684 761
0 171 231 312
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Differentiators
No. of branches No. of ATM's 2003- RFC,
tie up with
1998 – IRCTC for
1994- ATM’s linked
tickets, 2011 –
Treasury, to all 3 major
payment began Intensifying
State of 2001 – selling 2005 – mobile
systems,
art dealing launch debit launched home loans Credit card banking
room card ADR’s for HDFC for farmers services,
1997- 2000 – acquired Times 2002 – launched 2004 – tie 2010 – 2014 –
Interconnectivity Bank, launched DP wealth up with Introduces online
between all services on net, management NMCE for variable payment
branches, signed as introduced education programme warehouse interest gateway tie
a DP participant, loan, launched HDFC receipts rates to up with IIM
telebanking, interest securities, introduces attract long Lucknow
rate options, internet banking, term
interest rate and launch credit card deposits on
RD’s, 47
foreign currency
swaps
Premium Prices due to unmatchable

services
Arenas
• Market leader in online transactions Staging Economic Vehicles

because by leveraging customized ERP Logic
integrations to high-end SAP certified Internal Development:
solutions, • Primarily Internal
• One of the lowest interest rates in market Growth
due to very efficient credit monitoring, • Two sole acquisitions;
• Brand equity because of high quality service
Differentiators Times Bank Ltd (2000),
and relationship management, Centurion Bank of
• Employee equity by leveraging performance Punjab (2008)
management system and T&D programs to
maximize business per employee,
• Extensive merchant tie-ups to offer best-in-
class customer service,
• Offer greater customer choice, flexibility and
convenience to increase the retail business. 48
Elements Of Strategy
• Product: Personal banking, Rural

banking, small and medium
Cost Leadership and leveraging enterprises, corporate banking,
economies of scale to reach masses government business
Arenas • Geographical: presence in 37
countries across east and south Asia,
middle east, africa, australia
Economic
Staging Vehicles
• Merchant banking->Perennial
Logic • Internal development
Pension Plan Scheme->self (organic growth),
employment scheme->SBI • Mergers & Acquisitions
• Capital Market->Launched SBIMF-
> SBI Factors and Commercial
Serviced Pvt. Ltd.-> SBI Differentiators
• Stockinvest->SBI Securities ->ATM
network expansion -> SBI Life
Insurance company Pvt. Ltd. -> SBI • Reliability (government backup),
• Global card & gold card -> tie up • Highly recognized especially in
with Visa -> tie up with Paypal rural markets, lower interest rates
49
Elements Of Strategy
To become a global bank, diversifying

its revenue stream in an attempt to • Product/Business: Corporate banking,
limit its exposure to the U.S, where NRI banking, Personal banking, SME
market was maturing and profit banking, Retail Services, Retail Banking,
margins were squeezing. Commercial Banking, Branded Cards
Target high-income clients to maximize
Arenas and Investment Banking
margins • Geographical: Asia (APAC); Europe, the
Middle East and Africa (EMEA); Latin
America; and North America
U.S.->Europe->Mexico- • Market: Large Corporates, MMEs,
>Korea->Poland->China- SMEs, Retail bank account holders (Mid
>Turkey->Chile->Central Economic and High income)
Staging Vehicles
America->APAC Logic
• Joint ventures: mobile
• Retail Banking: Extensive rewards in credit card money venture with SK
programs (Air travel, airport services, reward telecom, Subsidiaries,
points), Multiple merchant tie-ups (esp. with e- M&A (eg. First American
commerce players like BookMyShow, Differentiators bank, Washington mutual
MakeMyTrip), Citi Priority and Citi Gold accounts,
finance corp, etc.)
Premier Wealth Management Services
• Corporate Banking: Dedicated sales, relationship
and product managers, Citi Supplier Finance,
CitiDirect with Mobile and Tablet Interfaces,
Customized Pooling solutions, Cross-border
payment solutions with automated document
upload (contrary to manual uploads as provided
by other banks), Citi Pulse for dynamic FX 50
transactions
Elements of Strategy Comparison
Element HDFC SBI Citi

Arena Products:- Loan products, Deposit Products:- Personal banking, Rural Products:- Corporate banking, NRI
Products, Commercial Banking, banking, small and medium banking, Personal banking, SME
Investment banking, Transactional enterprises, Corporate banking, banking, Retail Services, Retail
products, bill payments, depository government business, Mutual Banking, Commercial Banking,
services, mutual funds. funds, Investment banking Branded Cards, Investment Banking
Geography:- India Geography:- Geography:-
37 countries across east and south Asia (APAC); Europe, the Middle
Asia, middle east, Africa, Australia East and Africa (EMEA); Latin
America; and North America
Market:- Market:- Market:-

• Large corporate, • Large corporate, Large Corporates, MMEs, SMEs,
Medium/Emerging corporates, Medium/Emerging corporates, Retail bank account holders (Mid
Financial Institutions, PSU’s, Financial Institutions, and High income)
Retail Clients Government, PSU’s, Retail
Clients
51
Elements of Strategy Comparison
Element HDFC SBI Citi

Vehicles • Primarily Internal Growth • Internal/Organic growth • Internal/Organic growth
• Two sole acquisitions; Times • Mergers & Acquisitions • Joint ventures: mobile money
Bank Ltd (2000), Centurion (Merger of 5 SBI associates banks venture with SK telecom,
Bank of Punjab (2008) and Bhartiya Mahila Bank, 2017) Subsidiaries, M&A (e.g.. First
American bank, Washington mutual
finance corp., etc.)
Differentiator • Lowest interest rates in market • Reliability (government backup), • Retail Banking: Extensive rewards
due to very efficient credit • Highly recognized especially in rural Multiple merchant tie-ups, Citi
monitoring, markets, lower interest rates Priority and Citi Gold accounts,
• Brand equity because of high Premier Wealth Management
quality service Services
• Extensive merchant tie-ups • Corporate Banking: Dedicated
• Offer greater customer choice, relationship and product managers,
flexibility and convenience to Customized Pooling solutions, Cross-
increase the retail business. border payment solutions
Economic Logic • Premium Prices due to • Cost Leadership and leveraging • To become a global bank,
unmatchable services economies of scale to reach masses diversifying its revenue stream in an
attempt to limit its exposure to the
U.S, where market was maturing
and profit margins were squeezing.
• Target high-income clients to
Submitted to Prof. K.C. Balodi maximize margins 52
Links between Business Strategy and Previous Elements
Elements of Business Business Strategy External Environment Internal Environment

Strategy
Technological infrastructure and data
Technological Leadership Internet and mobile penetration
analytics
Geographical expansion in tier 3 to tier 6 cities Regulatory requirement Brand Equity
Arena Increase in working age population Extensive merchant tie ups and best in class
Focus on retail accounts
and disposable income customer service
Increase in agricultural lending and products Government emphasis on priority

Strong product portfolio
for agriculture and SME’s sector lending
Not doing acquisition because PSB’s Strong brand and availability of full product
Vehicle Internal Development cannot be taken over easily and there suite and geographical expansion can be
are not many sector targets done easily
Decline in asset quality and adverse

Differentiator Disciplined Credit Monitoring Employee equity and corporate governance
investment cycle
Technological leadership and employee
Staging Staging Low banking penetration in India
equity
Increase in high earning individuals Best in class service and one of the lowest
Economic Logic Economic Logic
who want better service cost of funds in industry
53
Strategic Canvas
Strategic Canvas
HIGH
MEDIUM
LOW
Offerings
CUSTOMER DIGITAL BREADTH OF DEPOSIT RISK CREDIT SCALE CSR ACTIVITIES EASE OF BANKING UBIQUITY LOAN, ASSEST NET BANKING GEOGRAPHICAL ATMOSPHERE
SERVICE INNOVATION PRODUCT MONITORING MANAGMENT COVERAGE
OFFERING FOCUS
HDFC Bank SBI Bank NBFI
54
Testing the Quality of Strategy
Key Evaluation Criteria Questions Answer

1. Does your strategy exploit a.) Does this strategy give you an advantageous a.) Yes, it gives us a premium positioning with the largest
your key Resources position relative to your competitors reach and strong growth potential
b.) Can you pursue this strategy more b.) Yes, because we have the best credit monitoring and
economically than competitors one of the lowest cost of funds in industry
2. Does your strategy fit with a.) Are you aligned with the key success factors of a.) Yes, we have technological leadership, cost leadership
Current industry Conditions your industry in funds and best credit monitoring processes
3. Will your differentiators be a.) Will competitors have difficulty imitating you? a.) Yes in credit monitoring services but no in technology.
sustainable? But we have a ceaseless regimen of innovation as
evidenced by our being at the front of launching every
new product and introduction of technology.
4. Will competitors have a.) Whether elements of strategy reinforce each a.) Yes
difficulty imitating you? other?
5. Can your strategy a.) Will your stakeholders allow you to pursue this a.) Yes, we have provided the best returns in industry
be implemented? strategy? b.) Yes, we hire the best talent pool, we have
b.)Do you have the proper complement of implemented the best technology, brand and best
implementation levers in place? leadership.
55
Profit Pool
PROFIT MARGIN
REVENUE SHARE
56
Recommendations
Acquisitions and Strategic Alliances

• Highly Fragmented Industry (152 Scheduled Commercial Banks and micro
finance companies)
• Mature Product Line
• High exit barriers
HDFC rural presence Rapid Rural Expansion

• Covers only 2% of the rural branches(Current Status)
• Rural Customers are more loyal customers and underpenetrated
• Possible through inorganic route (as mentioned above) – by acquiring
microfinance companies.
Enter M-wallets Mobile transactions / Total income is lower than other banks in strategic group
400
Smartphone
Users (MM)
200
204.1
167.9
123.3
33 44 76
2011 2012 2013 2014 2015 2016 57
Recommendations
International Expansion
• Current Presence in only 3 countries
• Significantly lower when compared to banks in the same strategic group
• Leverage of brand name, technology, financial assets and Indian diaspora
and companies
Stressed Asset Business

• To move into stressed assets business with ARC's (Rs. 9 lakh crore is bad
debt of Indian banks)
• Leverage on credit rating, monitoring and best corporate governance
policies
• First mover advantage
58
Recommendations
Paperless Banking
• Minimize Human Intervention
• Reduce costs and errors leading to increase WTP
Create competitive and compelling digital payment offerings

• Wallets, Payment Banks, Bitcoin
• Slowdown in expansion of ATMs (in metros and tier 1 cities)
by encouraging customers to use digital payments.
• Lowering of costs and increase in profitability
59

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CHARVI PANDEY

Number of Accounts vs Population No. of Bank Accounts vs Literacy rate

1,200 y = 9E+09x - 5E+09

Online Transactions vs Smartphone Users NIM vs GDP Growth rate

NPAs as % of Total Loans Net Interest Margin ROE

Loan/Deposit ratio ROA

Interest Income Growth Other income growth in indian banking sector

Public Private Foreign Public Private Foreign

ROA Net Interest margin over years

Threat of new entrants: Low

Bargaining Power Of Buyers:

Large Corporates(High) HNI (High) Middle (Moderate) Low (Low)

No of branches/sq. km. (Lending - Repo) rate

Threat of Substitutes: Moderate Competitive Rivalry: High

25 2012 102377 0.03114603

HDFC Bank’s nearest competitors:

• Outside Strategic Group:

Submitted to Prof. K.C. Balodi 10

Total Income Cost of Funds

Cost of Funds (Rs. Crore)

SGA Net Income

Net Income (Rs. Crore)

Total Assets Current Assets

Current Assets (Rs. Crore)

Deposits Total Stockholder Equity

Total Stockholder Equity (Rs. Crore)

Net Interest Margin (%) EPS

Total Assets (Rs. MM)

Bankwise Online Transactions/Total Income Size vs Profit/Employee

Level of Digitization Fee vs Float Income

Total Assets (Rs. MM)

Total Assets (Rs. MM) ROA GNPA Ratio

Focus on Technology and Digitization Better corporate governance:

Retuns Across Asset Classes Smartphone Users (MM)

• Rise in use of Mobile Wallets

• Rise of awareness of customers for equity markets or bonds

Ethical standards &

Customer Focus &

People & Sustainability

“To build sound customer franchises across

I dream of every Indian to own their homes.

“To provide financial and banking services in urban, semi-urban and

Key elements in company philosophy Customer centric, High on technology

1998 2001 2015

2000 2003 2016

HDFC bank is the highest valued brand in India

Online transactions as a percentage of total Bankwise Online Transactions/Total Income

Online Transaction Volume/Total Income ($

4. CORPORATE GOVERNANCE NORMS &

CORPORATE GOVERNANCE RANKS

• HDFC Bank – CGR 1

Corporate governance data of only 19 companies has been

FIRM INFRASTRUCTURE : Mobile payment platform, Two-factor Core Competencies

Mobile banking volumes rise faster value keeps apace

3. Brand equity because of high quality service and

Total Assets (Rs. MM)

relationship management Total Assets (Rs. MM) ROA GNPA Ratio

CORPORATE GOVERNANCE RANKS

1. Market leader in online transactions because by

2. Disciplined Credit Monitoring and strong culture of

3. Brand equity because of high quality service and

4. Employee equity by leveraging performance

CUSTOMER SERVICE INDEX