India’s largest private sector bank
HDFC Bank is India’s largest private sector bank. The management have a long track record of managing risks prudently, while maintaining industry-leading return-on-assets (ROAs) across economic cycles and periods of disruption.
The main reason for its impressive track record is its strong deposit franchise (HDFC Bank has more than 5,000 branches across India and around 50 million customers), which has given it a funding cost advantage. It also has a diversified loan book focused on retail customers, which has generated high risk-adjusted yields without incurring the same amount of stress that most other corporate lenders in India have experienced.
Although 60% of loans and deposits in India are still controlled by inefficient state-owned banks, well-run private banks like HDFC Bank have been gaining market share rapidly and we expect them to continue doing so. High-quality private banks enjoy many of the same growth drivers as consumer categories, with long-term tailwinds of rising incomes and greater financial inclusion. As such, we believe HDFC Bank (as well as other leading private banks in India, like ICICI Bank and Kotak Mahindra Bank) should have significant growth potential ahead of them.
Earnings per share (EPS) is calculated as a company's profit divided by the outstanding shares of its common stock
Return On Assets (ROA) is a measure of a company's profitability relative to its total assets.
Source: HDFC Bank Annual Reports, Indian Banks Association, Bloomberg, as at 31 March 2022.
Disclaimer: Reference to specific securities (if any) is included for the purpose of illustration only and should not be construed as a recommendation to buy or sell the same. All securities mentioned herein may or may not form part of the holdings of FSSA Investment Managers’ portfolios at a certain point in time, and the holdings may change over time.