PGDM BANKING AND FINANCIAL

SERVICES
Strategy Management in Banking &
Financial Services

HDFC Bank
 About the bank

HDFC bank established in August 1994, is now the country’s largest private sector bank by assets and
the largest bank by market capitalization. HDFC Bank provides a number of products and services
including wholesale banking, retail banking, treasury, auto loans, two-wheeler loans, personal loans,
loans against property, consumer durable loan, lifestyle loan and credit cards. Along with these,
various digital products are Payzapp and SmartBUY. The bank’s positioning can be described as the
Highest Quality with an assortment of different products offered, which makes it a generalist. In
2019, HDFC Bank was the winner in Innovation & Inclusiveness in Priority Sector Lending – 11 th
Inclusive Finance India Awards and has been awarded the Best Bank by Euromoney in 2020 and
2019.

Mission & Vision

HDFC Bank’s mission is to be a world class Indian bank. It follows a twofold objective, first – to be the
preferred provider of banking services for target retail and wholesale customer segments, second –
to achieve healthy growth in profitability, consistent with the bank’s risk appetite. The bank’s
philosophy is based on five core values – Operational Excellence, Customer Focus, Product
Leadership, People & Sustainability.

Technology Focus

HDFC Bank operates in a highly automated environment powered by information technology and
communication systems. All branches have online connectivity which enables speedy funds transfer
for customers. The bank also implements best technology available internationally to build the
infrastructure for a world class bank. HDFC Bank has prioritised its engagement in technology and
the internet as one of its key goals and has already made significant progress in web-enabling its
core businesses. In each of its businesses, the bank has succeeded in leveraging its market position,
expertise and technology to create a competitive advantage and build market share.

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 Successful Performance

HDFC Bank showed good FY20

Return on Equity (in %) results with the key pointers
30 being (1) Wholesale to drive
20 growth, retail will be tepid (2) In
10
wholesale banking, focus is on
top quality corporates and short-
0
2020 2019 2018 2017 2016 maturity assets (3) NPAs will
-10
increase (4) Pre-emptive
-20 measures position the bank
-30 better (5) Low moratorium
-40 adoption rate not necessarily an
HDFC ICICI SBI KOTAK PNB
indicator of the path forward (6)
Liability side to benefit from flight
to safety (7) Cost ratios to
improve structurally; FY21 could be some aberration. Per se, on the key P&L items, bank posted NII
growth of 16% YoY at Rs152,041mn, PPOP growth of 20% YoY at Rs129,588mn and PAT growth of
18% YoY at Rs69,277mn.

As can be seen from the graph, HDFC bank has consistently been the market leader in the banking
industry delivering the highest returns year after year. The consistent high ROE offers opportunities
to the bank to deploy profitability at a high rate. This helps the bank to compound book value
consistently. Bank's asset quality has not deteriorated even during a subdued economy over FY2011-
15. The bank has always held a strong balance sheet despite a challenging macro environment and a
steady NIMs but additional pressure on asset quality. The bank stock has delivered manifold returns
since its listing. It has risen almost over 1,000% in the last 10 years as compared to 290% returns by
Sensex during the same period.

External Environment

There are many different competitors for HDFC bank in the market. Direct competitors include
Indian as well as Foreign banks such as ICICI, Kotak, SBI, Standard Chartered, HSBC & Citibank. There
are many other financial institutions as well which don’t compete directly but offer certain similar
products & services. These can be NBFCs, MFIs and the newly emerging Fintechs.

The banking industry can be classified as a very competitive industry due to the following reasons,

 Due to the regulations imposed by the central bank, RBI, the scope for differentiation among
products & services offered is very less. As a result, banks can effortlessly manage to take
away the competitors market share. The banks are very aggressive in the marketing
strategies and usually invest huge amount in their ad spends.
 The rules regarding licensing set up by the central bank are very strict in regards to opening
up of new banks. Also, banking industry by its very nature is based on trust and it is not so
easy for a new entrant to earn the trust of people with their hard-earned money. As new

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 private players continue to enter the market in the near future, the competitiveness of the
industry is bound to increase.
 As the customers become more & more knowledgeable and lifestyles get better, they start
to demand diverse products such as housing loans, gold loans, derivatives, personal advisory
services, etc. Given such wide-ranging needs of consumers there will always be scope of
innovation and new product development in the industry.
 RBI is the only supplier; therefore, the decision-making authority of the central bank can be
termed as monopolistic.
 The customers of the banks have become very demanding as information becomes readily
available since the advent of technology. As new private players continue to emerge and
competition increases, consumers become more demanding for better prices and services.
Thus each bank tries to woo customers by offering them the latest products and services
thereby leading to high bargaining power among consumers.

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