High-quality private bank in India continues to gain share
HDFC Bank is the largest private-sector bank in India, with over 10% market share in loans and deposits. The management has a long track record of managing risks prudently, while maintaining industry-leading return-on-assets (ROAs) across economic cycles and periods of disruption. We have owned the bank for many years and have long admired the management team, and the way it has pursued growth in a countercyclical and conservative manner.
We believe its impressive track record is largely due to 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 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. Moreover, HDFC Bank’s merger with parent company Housing Development Finance Corp (mortgage lender), which completed in 2023, should lead to a stronger financial conglomerate and be accretive to returns over time.
Although the majority 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 over the years and we expect them to continue doing so. 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.
Steadily increasing market share and earnings per share
Consistent returns across cycles and strong growth
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 May 2025.
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