hdfc bank strategy

8/13/2019 HDFC Bank Strategy

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Submitted By-

Aditya Aggarwal

Aditya Narayanan

Anand ChandranAnkita Kunwar

Kevin Abraham

Pulkit Kabra

Saket Deepak


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About HDFC

Housing Development Finance Corporation Limited, more popularly

known as HDFC Bank Ltd, was established in the year 1994, as a part of the

liberalization of the Indian Banking Industry by Reserve Bank of India (RBI).

It was one of the first banks to receive an 'in principle' approval from RBI,

for setting up a bank in the private sector

The bank was incorporated with the name 'HDFC Bank Limited', with its

registered office in Mumbai. The following year, it started its operations as

a Scheduled Commercial Bank. Today, the bank boasts 1412 branches and

over 3275 ATMs across India


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History Of HDFC Bank

1994

The Bank was Incorporated on 30th August. A new private sector Bank

promoted by housing Development Corporation Ltd

The bank is the first of its kind to receive an in-principle approval from the

RBI for establishment of a bank in the private sector


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1995

The Bank opened its first branch in Ramon House at Churchgate, Mumbai

on January 16th

1996

HDFC Bank set up a state-of-the-art dealing room to handle all

transactions possible in Indian financial markets

The Certificates of Deposits were awarded a PP1+ rating


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1997

HDFC installed state-of-the-art systems to facilitate inter-connectivity

between branches and link up with on line system

HDFC Bank, planned to set up an all-India on-line automated teller

machine (ATM) network

Proposed to launch tele-banking for the first time in June

Becomes the first private sector bank to conclude a structured interest

rate option deal


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1997

HDFC Bank entered into strategic alliances with 10 overseas banks to

provide customers with a wide range of derivatives including interest rate

and foreign currency swaps

Introduced ATMs that converse in a regional language

Introduced the Freedom Account for the average retail customer

Launched an account across India that seeks to free depositors from

minimum balance requirement, for the first time in the country


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1998

Signs an agreement with the National Stock Exchange (NSE) which will give

it a second charge over the brokers deposit for providing loan against

share facility to NSE brokers

Becomes the first bank in India to link up its ATM network with all the

three major payment systems world-wide

Ties up with Master Card and Visa


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1998

First bank in the Asia-Pacific region to connect the American Express

(Amex) payment system

Sony India Ltd (SIL) joined hands with HDFC Bank to work out an

innovative car finance package

Tied up with BPL Ltd to offer Internet-enabled supply-chain management

and business-to-consumer (B2C) e-commerce services to corporates


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1998

Hutchison Max Telecom and HDFC Bank introduced the country's first-ever

mobile-banking services

2000

Become the first bank in the country to offer wireless application protocol

(WAP) services to customers

Tied up with financial portals, e-brokerages and the National Stock

Exchange to enable broker payments for e-broking ventures


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2000

Launched its first B2C payment gateway which allows Visa and MasterCard

credit card-holders to do transaction online and realtime

Launched `eInstant Car Loans' a new scheme for offering customers a

range of net-enabled loan products

Launched depository services on the net

Tied up with portal brainvisa.com to retail education loans to students


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2001

The Bank has launched the international Maestro debit card in association

with Master Card

Launches its credit card in June through link-ups with MasterCard and Visa

Entered into a strategic tie-up with Tally Solutions Pvt. Ltd. to offer online

real time accounting services to SMEs


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2002

HDFC Bank opens first overseas representative office

Unveils Gold and Silver Cards

Launched new products to its wealth management programme to increase

its customer base. It introduced a non-interactive product named Financial

Planner, which would be available for all its customers for an annual fee

starting from Rs 10,000


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2003

Unveils resident foreign currency account

Unveils co-branded credit card with e-Seva

HDFC Bank, IRCTC in tie up for online railway booking

Introduces 'HDFC Bank Health Plus Credit Card

Launches India's first mobile payment solution


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2005

Launches loyalty rewards programme for its debit and credit cardholders

under the name InstaWonderz

Unveils credit card for farmers

2006

Osim to join hands with HDFC Bank for consumer loans

Inaugurates VbV facility for online shopping


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2007

Signed an agreement with Tata Pipes to offer credit facilities to farmers

across the country

2008

HDFC Bank and Centurion Bank of Punjab merger at share swap ratio of

1:29

Launches Indias First Online Market Linkage Programme For Self Help

Groups


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2009

HDFC Bank launches Meritus Scholarship Programme

The Asian Banker declares HDFC Bank the Best Retail Bank

2010

Decided to pay variable interest rate on recurring deposits


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Amalgamations

In 2002, HDFC Bank witnessed its merger with Times Bank Limited (a

private sector bank promoted by Bennett, Coleman & Co. / Times Group).

With this, HDFC and Times became the first two private banks in the New

Generation Private Sector Banks to have gone through a merger. In 2008,

RBI approved the amalgamation of Centurion Bank of Punjab with HDFCBank. With this, the Deposits of the merged entity became Rs. 1,22,000

crore, while the Advances were Rs. 89,000 crore and Balance Sheet size

was Rs 163000 crore


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Capital Structure

At present, HDFC Bank boasts of an authorized capital of Rs 550 crore

(Rs5.5 billion), of this the paid-up amount is Rs 424.6 crore (Rs.4.2 billion).

In terms of equity share, the HDFC Group holds 19.4%. Foreign

Institutional Investors (FIIs) have around 28% of the equity and about

17.6% is held by the ADS Depository (in respect of the bank's American

Depository Shares (ADS) Issue). The bank has about 570,000 shareholders.Its shares find a listing on the Stock Exchange, Mumbai and National Stock

Exchange, while its American Depository Shares are listed on the New York

Stock Exchange (NYSE), under the symbol 'HDB'


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Awards

CNBC TV18's Best Bank & Financial Institution Awards

Best Bank

Dun & Bradstreet Banking Awards 2011 - Best Private Sector Bank -

SME Financing ISACA 2011 award for IT Governance - Best practices in IT

Governance and IT Security

Euromoney Awards for Excellence 2011 - Best Bank in India

FINANCE ASIA Country Awards 2011: India - Best Bank, Best Cash

Management Bank, Best Trade Finance Bank Asian Banker - Strongest Bank in Asia Pacific

Bloomberg UTV's Financial Leadership Awards 2011 - Best Bank


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Awards

IBA Banking Technology Awards 2010

Winner

1) Technology Bank of the Year

2) Best Online Bank3) Best Customer Initiative

4) Best Use of Business Intelligence

5) Best Risk Management System

IDC FIIA Awards 2011 - Excellence in Customer Experience

The Banker and PWM 2010 Global Private Banking Awards-Best Private

Bank in India


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Awards

Forbes Asia- Fab 50 Companies - 5th year in a row

NDTV Business Leadership Awards 2010- Best Private Sector Bank

Business Today Best Employer Survey- Listed in top 10 Best Employers in

the country

Asian Banker Excellence Awards 2010

Best Retail Bank in India

Excellence in Automobile Lending

Best M&A Integration

Technology Implementation


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HDFC Credit Card Vs Debit Card


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HDFC Credit Card Vs Debit Card

For HDFC, one of the largest private sector banks of India, the number of

credit cards and debit cards have been comparable, unlike other banks

such as ICICI and SBI, whose credit card debit card deficit have been

significant

Over a span of 2 years, the number of debit cards have gone up by 71.85%

to 4.36 million by the end of March 2011, whereas the number of credit

cards have increased by 19.53 % to 5.22 million. On comparing HDFC with

ICICI and SBI, we discovered two interesting patterns: HDFC is the only

bank among the three whose credit cards outnumber debit cards.

Secondly, the absolute numbers of cards are considerably fewer than that

of ICICI and SBI


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Most Social Engagement Bank


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Stock prices


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Facts

Despite macroeconomic headwinds, the bank was able to maintain its net

non-provisioning assets at 0.2 per cent on a sequential basis. At 81.3 per

cent, the provision coverage ratio was also healthy

It is better placed than many peers to maintain its asset quality. However,

it has significant exposure (around 15 per cent) to the small and medium

enterprises (SME) segment

HDFC Banks loan growth stood at a healthy 25.6 per cent, up 560 basis

points over the June quarter. According to the management, while retail

loan growth remained on track, growth in the corporate lending segment

was mainly led by working capital loans and ongoing loans. The loan book

was boosted by 38-40 per cent year-on-year growth in business banking

loans to SMEs, commercial vehicle, construction equipment and home

segments


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Facts

Though the deposit growth has nearly halved from 30.4 per cent in the

year-ago quarter, at 18.1 per cent, it was higher than the 15.4 per cent

seen in the June quarter, and in line with the managementsaim

Despite the tough macroeconomic environment, at 4.1 per cent, the bankwas able to control its net interest margin compression to 10 basis points.

This is within the managementstarget range of 3.9-4.2 per cent


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Porters Forces

Threat of competitorsLarge number of banks

Strong exit barriers

Low switching costs

Threat of substitutesDeposits in posts

Non Banking financial

sector growing rapidly

Bargaining power of

consumer

Numerous alternatives

Low switching costs

Increasing consumer

awareness

Threat of new entrantsProduct differentiation

very difficult

Entry barriers

Bargaining power of

suppliers

RBI rules and

regulations


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Porters Forces

Threat of Competitors

Large number of banks

There are so many banks competing against each other for the same

set of people

Strong exit barriers

There are a lot of customers who are at stake and numerous legal

obligations which need to be fulfilled

Low switching cost

Costumers switching cost is very low, they can easily switch from one

bank to another bank


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Porters Forces

Bargaining power of suppliers

RBI rules and regulations

RBI lays down rules and regulations according which the banks are

governed


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Porters Forces

Bargaining power of consumers

Numerous Alternatives

There are numerous banks competing against each other for the same

set of people

Low switching cost

Costumers switching cost is very low, they can easily switch from one

bank to another bank

Increasing consumer awarenessWith the increasing amount of information available to the consumer,

banks have to be more competitive and customer friendly to serve

them. If not, the consumer can easily switch to their competitors


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Porters Forces

Threat of new entrants

Product differentiation very difficult

Services provided by banks are not highly differentiated which

increases the bargaining power of consumers

Entry Barriers

Reserve Bank of India has laid out a stagnant rules and regulation for

new entrant in Banking Industry


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Porters Forces

Threat of substitutes

Non-Banking financial sector

These are financial resources outside the traditional banking system

which has witnessed a tremendous growth in recent years in India

NBFC is a close substitute of banking in respect of raising funds.

Deposit in Posts

Post office provides services like fixed deposits, savings account,

recurring account etc. The interest rate

of saving account is higher than private banks. Sinceit is fully secured by the government, people

who do not want to take risks look at post office saving as a good

substitute


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Industry Size

Indias GDP (USD Billion PPP) 4057Share of Services (% of GDP)55.2

Banking and Insurance Size (USD Billion)395.96

Source:http://www.interlinkre.com

0.18%

9.40%1.81% 2.53%

2.74%

9.76%

26.94%20.61%

14.67%

11.36%

00 0

0

Composition of Service Sector

Storage

Transport

Railways

Hotels & Rest.

Commu.

Banking & Insurance

Trade

Real Estate

Other Services

Public Admin. & Defence
http://www.interlinkre.com/http://www.interlinkre.com/


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Growth

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

2005-06 2006-07 2007-08 2008-09 2009-10

15.90%

20.60%

16.70%

14%

11.30%

Annual growth in Banking and Insurance sector whichforms a part of Indias services

Annual Growth

Source:http://www.interlinkre.com
http://www.interlinkre.com/http://www.interlinkre.com/


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Segmental Analysis

Reserve Bank ofIndia

Scheduled

Commercial Bank

Non-Scheduled

Commercial Bank

Local Area BankCo-operative BankCommercial Bank

Foreign24 Urban Bank State Bank

Private Sector22

Regional rural6

Public Sector26

New7 Old15SBI Group7 Nationalized19


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Segmental Analysis

PSU Banks

Government of India holds majority of stakes in PSU banks. They are the

largest category in the Indian banking system

Regional Rural Banks

Established during 1967-1987, they are jointly owned by the Central

government, State Government and a sponsoring public sector commercialbank

Private Sector Banks

They have major portion of the share capital with private individuals and

corporates. Non-nationalized are old private banks and nationalized in1993 are termed as new private banks

Foreign Banks

They have their head offices in a foreign country but operate their

branches in India


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Segmental Analysis

0

10000

20000

30000

40000

50000

2010 2011

3925744901

1311117712

4741 7719

Public Sector Banks


Foreign Banks

Profit during the year

0.00%

50.00%

100.00%

2011

14.38%

35.09%

62.81% Public Sector Banks


Foreign Banks

Growth in profit during

the year

Amount in Crore Rupees

Source:http://rbidocs.rbi.org.in
http://rbidocs.rbi.org.in/http://rbidocs.rbi.org.in/


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Basis of CompetitionThe following factors have influenced the increase in competition in the

banking sector

Profitability - Higher profitability compared to the past or international

standards. This attracts new entrants which increases the competition in

the industry

Technological ChangesThis enable quicker and more efficient serviceProduct Innovations Features such as home banking, ATMs etc are

making the industry fiercely competitive

Entry/Exit Norms Though regulatory barriers have been eased,

desirable barriers exist in the form of capital and other requirements

Increasing consumer awareness - consumers of banking services aregetting increasingly agile, enlightened, cost and quality conscious. They are

already forcing the pace of competition on price, product and quality

products


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Critical Success Factors

There are 5 critical success factors applicable in the banking sector

IT and New technology Technology has the potential to change

approached to marketing, advertising, designing, pricing and distributing

financial products and services and cost savings in

the form of an electronic, self-service medium. Technology holds the

key to the future success of Indian Banks

Features like internet banking, anytime, anywhere banking, tele-banking,

remote access, multi city chequing facilities etc have become a key

differentiator

Low employee cost Focusing on increasing employee efficiency by

adopting people centric policies. There are various methods that are used

to achieve this.


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Critical Success Factors

Managing NPAs NPAs have been on of the major problems for Indianbanks. However due to the active steps taken by the regulatory authorities

and the banks, the gross NPA level has been reduced. To ensure long-term

profitability, banks have to manage NPAs effectively by adopting the many

techniques

Diversified Products Diversification in the product set gives the

customer a wider variety of choices which enhances the banks competitive

edge.

Innovation/New product is a key driver of growth that surprises and

delights the customer with new, differentiated and relevant benefits


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Demand Drivers

High Economic Growth

Increase in purchasing

power

Sectors showing

growth

Retail Infrastructure Telecom Rural Markets Exports/Imports


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Demand Drivers

RetailIncrease in demand for housing, car, personal loans etc

InfrastructureIncrease in this

Telecom 3G and broadband spectrum auction have increased credit

demand

Rural Markets As the economy grows there will be more penetration

of private banks in rural areas

Exports/ ImportsAn increase in the export and imports would directly

increase the business of banks through their transactions, loans, bills etc


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Key Events

Main mergers and acquisitions in the Indian banking sector

HDFC Bank acquires Centurion Bank of Punjab (May '08)

Standard Chartered acquires ANZ Grindlays Bank (November '00)

Bank of Baroda acquires South Gujarat Local Area Bank Ltd (June '04)

ICICI Bank acquires Bank of Madura (March '01)

Oriental Bank of Commerce acquires Global Trust Bank Ltd (August '04)


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Regulations

Banks in India are governed by the Reserve Bank of India.

Banking Regulation Act, 1949

As per Section 5(c) of Banking Regulation Act, 1949 a "Banking Company"

means any company which transacts the business of banking in India.

Explanation:Any company which is engaged in the manufacture of goods

or carries on any trade and which accepts the deposits of money from

public merely for the purpose of financing its business as such

manufacturer or trader shall not be deemed to transact the business of

banking within the meaning of this clause.

As per Section 5(b) of Banking Regulation Act, 1949 , banking means the

accepting, for the purpose of lending or investment, of deposits of money

from the public, repayable on demand or otherwise, and withdrawable by

cheque, draft, order or otherwise.


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Regulations

Banking Regulation Act, 1949(continued)As per Section 5(d) of Banking Regulation Act, 1949 , company means any

company as defined in Section 3 of the Companies Act, 1956 and includes

a foreign company within the meaning of Section 591 of that Act.

As per section 51 of Banking Regulation Act, 1949 , certain provisions of

the Banking Regulation Act are also applicable to the State Bank of India ,

any corresponding new bank, a regional rural bank and any subsidiary

bank. "Corresponding new bank" has been defined under clause(ee)of

section 2 of the DICGC Act to mean a corresponding new bank constituted

under the Banking Companies (Acquisition and Transfer of Undertakings )

Acts of 1970 or 1980.

Source: http://fiuindia.gov.in
http://fiuindia.gov.in/http://fiuindia.gov.in/http://fiuindia.gov.in/http://fiuindia.gov.in/http://fiuindia.gov.in/http://fiuindia.gov.in/http://fiuindia.gov.in/http://fiuindia.gov.in/


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Competitor Analysis

Strategies to enhance revenue

Efficient delivery of products and services can strengthen customer

relationship which will reduce operational costs.

Banks are automating routine transaction and redesigning branches to

suit local preferences for products , services and pricing.

Banks are also adding customer facing functions that are specifically

designed for their business.


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Financial Analysis Deposits

(Rs. Crore)

Public Sector

Banks, 4372985

Private Sector

Banks, 1002759

Foreign Banks,

240689

Source-

http://www.rbi.org.in/home.aspx

f ff k (
http://www.rbi.org.in/home.aspxhttp://www.rbi.org.in/home.aspx


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Deposits of Different Banks (Rs.

Crore)1245862

225602 208586 189237

0

200000

400000

600000

800000

1000000

1200000

1400000

Deposits

SBI & Associates ICICI HDFC AXIS


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CAR of Different Banks (%)

11.98%

19.50%

16.20%

12.65%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

CAR

SBI & Associates ICICI HDFC AXIS


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BUSINESS MODEL

B i St t


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Business Strategy Increase the market share in India

Expand the product range and the customers

Improve the quality of customer service

Innovate on the product and service range to attract more customers and

address the existing inefficiencies

Maintain a disciplined credit risk management

Reduce banks cost of funds

HDFCs diverse loan portfolio along with superior lending practices de-risksits business model

Lower operating costs along with stable margins and high asset qualityensures sustainable profitability

h l h


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Business Philosophy

Based on 4Core Values

OperationalExcellence

CustomerFocus

ProductLeadership

People


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Improved Technology Adaptation

HDFC adopts the latest technology to provide the best for its customers

ATM facilities increased in number

Net banking, Phone banking etc. introduced and promoted


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Retail Banking Products

Loan products

o Auto loans, loans against securities, personal loans, credit cards, home

loans, commercial vehicle finance etc.

Depository productso Savings, Current, Fixed deposits

Other products/services

o Debit cards, mutual fund sales, insurance sales, NRI services, bill

payment services


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Retail

Retail mortgage accounts for around 2/3rds of the total loan

Majority is of individual borrowersdefault rates are minimal

Majority is for middle class, salaried employees; greater focus in Tier 2 and3 citiesensures diversification of the retail portfolio


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Wholesale Banking Products

CommercialBanking

Working capital, term loans, bill collection, Forex and Derivatives,

Letters of Credit, Guarantees

Transactional Banking

Cash management, custodial services, clearing bank services, tax

collections, banker to public issues


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Wholesale

HDFC is a financier to real estate developersincreased chance ofdefaults

Stringent norms like low loan-to-value(LTV) ratio of less than 65%

[proportion of loan value to property value]

Funding highly rated corporate

Loans for acquisition of property in IT parks and industrial zones


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HDFC Services

43%

40%

14%

2% 1%

2001Branches

ATMs

Phone

BankingInternet

Mobile

17%

45%12%

25%

1%

2008

Branches

ATMs

Phone Banking

Internet

Mobile


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SEGEMENTAL PRESENCE of HDFC


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Key Segments

Wholesale

BankingServices

RetailBankingServices

Treasury


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ASSOCIATED COMPANIES

HDFC BankHDFC Asset

ManagementCompany Ltd

HDFC Standard LifeInsurance

Company LimitedHDFC Sales

HDFC ERGOGeneral Insurance

Company ltd

HDFC Trustee

Company Ltd.

HDFC Developers

Ltd.

HDFC Investments

Ltd.

HDFC PropertyVentures Ltd.

Wholesale Banking Services


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Wholesale Banking Services The Bankstarget market ranges from large manufacturing companies in the Indian

corporate to small & mid-sized corporate and agri-based businesses

HDFC provides a wide range of commercial and transactional banking services,

including working capital finance, trade services, transactional services, cash

management, etc.

The bank is also a leading provider to corporate customers, mutual funds, stock

exchange members and banks

Corporate-

Funded Services

Non Funded Services

Value Added Services

Internet Banking

Small and MediumEnterprises-

Funded Services

Non Funded Services

Specialized Services

Value added services Internet Banking

Financial Institutions andTrusts-

BANKS- Sub-Membership,RTGS submembership, FundTransfer, ATM Tie-ups, Tax

Collection FinancialInstitutions

Mutual Funds

Stock Brokers

Insurance Companies

Commodities Business


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Wholesale Banking - Facts

The business from this segment registered a healthy growth, The

wholesale deposits grew by around 27.4%, while wholesale advances

showed a growth of over 26.7%

Consolidated its position as a leading player in the cash managementbusiness

Wholesale banking branch are also in Bahrain, a branch in Hong Kong and

two representative offices in UAE and Kenya. The branches offer the

Banks suite of banking services including treasury and trade financeproducts to its corporate clients

R il B ki S i


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Retail Banking Services

HDFC Bank was the first bank in India to launch an International DebitCard in association with VISA (VISA Electron). The Bank launched its

credit card business in late 2001

The Bank is also one of the leading players in the merchantacquiring

business with over 70,000 Point-of-sale (POS) terminals for debit / credit

cards acceptance at merchant establishments

The Bank also has a wide array of retail loan products including Auto

Loans, Loans against marketable securities, Personal Loans etc.

It is also a leading provider of Depository Participant (DP) services for

retail customers, providing customers the facility to hold their

investments in electronic form. The products through alternative delivery channels like ATMs, Phone

Banking, Net Banking and Mobile Banking


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Retail Services

Loan Product

Auto Loan

Loan AgainstProperty

Personal loan

Credit cardCommercial

vehicles finance

Home loans

Retail businessbanking

Working Capital

FinanceHealth Care

Finance

Education Loan

Gold Loan

Deposit Product-

Saving a/c

Current a/c

Fixed deposit

Demat a/c

Safe DepositLockers

Investment &Insurance-

Mutual Fund

Bonds

Insurance

Equity and

DerivativesMudra Gold Bar

Cards and Services-

Credit Card

Debit Card

Prepaid Card

Bill pay

Direct PayVisa Money

Transfer

Online Payment ofDirect Tax

Mobile Banking

ATM

Phone BankingEmail Statements

Branch Network


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Retail Banking - Facts

The growth in retail banking business was robust during the financial yearended March 31, 2011. The Bankstotal retail deposits grew by over 23.3%

to - 139,961 crore in the financial year ended March 2011, driven by retail

savings balances which grew much faster at 28.0% during the same period

The Banksretail assets grew by 26.8% to - 80,113 crore driven primarily

by a growth in mortgages, business banking, commercial vehicle loans and

auto loans

C i


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Comparison

0

10

20

30

40

50

60

70

2006 2007 2008

Wholesale

Retail

0

200

400

600

800

1000

1200

2006 2007 2008

Wholesale

Retail

Figure 2 TOTAL DEPOSITSFigure 1 NET REVENUES

HDFC Bank is a consistent player in the private sector bank and have a

well-balanced product and business mix in the Indian as well as overseasmarkets.

Customer segments (retail & wholesale) account for 84% of Net

revenues ( FY 2008)

Higher retail revenues partly offset by higher operating and credit costs.

Equally well positioned to grow both segments

Treasury


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Treasury

Foreign Exchangeand Derivatives

Local CurrencyMoney Market &Debt Securities

Equities

To comply with statutory reserve requirements, the bank is required

to hold 25% of its deposits in government securities. The Treasury

business is responsible for managing the returns and market risk onthis investment portfolio


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Treasury

The treasury group is responsible for compliance with reserverequirements and management of liquidity and interest rate risk on the

Banks balance sheet

During the financial year ended March, 2011, revenues from foreign

exchange and derivative transactions grew by 26.2% to Rs. 786.3 crore

These revenues were distributed across large corporate, emerging

corporate, business banking and retail customer segments

Geographical Revenue


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Geographical Revenue

Segmentation IndexRevenue Domestic Growth% Foreign Growth %

2006 1 1

2007 1.15 16 1.44 44

2008 2.46 113 1.99 38

2009 1.49 (39) 2.77 392010 1.23 (17) 3.17 14

Revenue has been increased from 2006 to 2010 and is still

growing at acceptable pace There is a negative growth in terms of domestic revenues


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Geographic Spread of HDFC

6%

32%

28%

34%

No. of Branches

Rural

Semi-Urban

Urban

Metro-Politian

Segmental Growth


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Segmental Growth

FY07 FY08 FY09 FY10

Retail Banking 94% 77%

Wholesale Banking 99% 78%

Treasury 191% 331% 101% 83%

Life Insurance 115% 112%

General Insurance 121% 107%

Venture Fund

Management

53%

In the last few years Retail Banking has been shrinking

Venture Fund Management has added another revenue potential

Overall market share


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Overall market share

For the quarter ended September 2011, its total income was 7,929.4crore, an increase of 37.4% over 5,770.7 crore, for the quarter ended

September 30, 2010

Net revenues (net interest income plus other income) were 4,156.2 croreas compared to 3,487.0 crore for the corresponding quarter of the previous

year


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Total deposits were 230,676 crore, up by 18.1% from last year

Savings account deposits at 69,017 crore increased 15.9%

The Banks branch network stood at 2,150 branches in 1,141 cities (an

increase of 385 branches from 1,765 branches

6,520 ATMs, (an increase of 1,799 ATMs from 4,721)

f h l


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Information Technology

Bank has made substantial investments in its technology platform andsystems, built multiple distribution channels

That including an electronically linked branch network, automated

telephone banking, internet banking and banking through mobile phones,

to offer its customers convenient access to various products.

Highlights of 2010 11


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Highlights of 2010-11

Net Profits of Rs. 3926 Crore, an increase of 33% over the previousyear

Balance Sheet Size Rs. 277,353 Crore as on 31stMarch, 2011

Total Deposits of Rs. 208,586 Crore, an increase of 24.6% over previous

year

Network of 1986 Branches and 5471 ATMs in 996 cities as on 31stMarch, 2011

BanksCapital Adequacy Ratio as on 31stMarch ,2011 stood at 16.2%

as against regulatory minimum of 9%

Total Advances were Rs. 159,983 Crore, an increase of 27.1% over theprevious year

N R


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Net Revenues

2006-07 : 498,471 Lacs 2007-08 : 751,103 Lacs

2008-09 : 1,071,176 Lacs

2009-10 : 1,236,953 Lacs

2010-11 : 1,487,828 Lacs

Profit After Taxes


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Profit After Taxes

2006-07 : 114,145 Lacs

2007-08 : 159,018 Lacs

2008-09 : 224,493 Lacs

2009-10 : 294,870 Lacs

2010-11 : 392,640 Lacs

P fi M i P fi /R


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Profit Margin= Profit/Revenues

2006-07 : 22.89% 2007-08 : 21.17%

2008-09 : 20.95%

2009-10 : 23.84%

2010-11 : 26.39%

P fit Aft T i (R C )


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Profit After Tax in (Rs. Crore)

1141

1590

2245

2949

3926

0

500

1000

1500

20002500

3000

3500

4000

4500

Years

2007 2008 2009 2010 2011

N P f i A t (%)


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Non Performing Assets (%)

1.74%

1.54%

0.48%

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

1.80%

2.00%

Year

2009 2010 2011

DPS (R )


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DPS (Rs.)

78.5

10

12

16.5

0

2

4

6

810

12

14

16

18

Year

2007 2008 2009 2010 2011

EPS (R )


88/214

EPS (Rs.)

36.3

46.252.9

67.6

85

0

10

20

30

4050

60

70

80

90

Year

2007 2008 2009 2010 2011

Balance Sheet Size (Rs. Crore)


89/214

183271222459

277353

0

100000

200000

300000

Year

2009 2010 2011

Advances (Rs. Crore)

98883125831

159983

0

50000

100000

150000

200000

Years

2009 2010 2011

Deposits (Rs. Crore)


90/214

142812167404

208586

0

100000

200000

300000

Year

2009 2010 2011

Savings Deposits (Rs. Crore)

34915 49877

63448

0

50000

100000

Year

2009 2010 2011


91/214

Capital Adequacy (%)


92/214

15.7

17.4

16.2

14

15

16

17

18

Year

2009 2010 2011

Return on Capital (%)

16.2

16.816.5

15.5

1616.5

17

Year

2009 2010 2011

ATMs (Nos )


93/214

ATMs (Nos.)

32954232

5471

0

20004000

6000

Year

2009 2010 2011

Cities (Nos.)

0

500

1000

1500

Year

2009

2010

2011


94/214


95/214

Rupee Spent in 2010 11


96/214

Rupee Spent in 2010-11

41.48%

31.62%

8.43%

8.36%

6.15%3.96%

Rupee Spent

Interest Expense = 41.48%

Operating Expense =

31.62%

Provisions = 8.43%

Tax = 8.36%

Transfer to Reserve =6.15%

Dividend & Tax on

Dividend = 3.96%

FINANCIAL PERFORMANCE (in crore)


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FINANCIAL PERFORMANCE (in crore)

March 31, 2011 March 31, 2010

Deposits and Other

Borrowings

222,980.5 180,320.1

Advances 159,982.7 125,830.6

Total Income 24,263.4 20,155.8

Profit before

Depreciation and Tax

6,316.1 4,683.5

Net Profit 3,926.4 2,948.7

Profit brought forward 4,532.8 3,455.6

Total Profit available

for Appropriation

8,459.2 6,404.3

Financial Analysis


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yAs shown in the graphs :

HDFC Bank has a consistent high CAR Ratio, which signifies the solid position

of the bank.

NPAs of HDFC Bank are very low. This shows the banks good relations with

its customer.

Deposits are increasing continuously which shows the good services

provided by the bank.

NIM for the bank is also good which further solidifies its position in the

market.

Profit margins are increasing year by year.

Market Capitalization


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Market Capitalization

Market Capitalization depends upon the future performance of the companyto a large extent

It is different from profit margin and profitability

PE Ratio = Market Capitalization

Profit

Market Capitalization ( MC)


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Market Capitalization ( MC)

MC= PE Ratio* Profit After Tax

2006/07 = 26.29 * 114145 lacs = 3000872 lacs

2007/08 = 28.80 * 159018 lacs = 4579718 lacs

2008/09 = 18.42 * 224493 lacs = 4135161 lacs

2009/10 = 28.62 * 294870 lacs = 8439179 lacs

2010/11 = 27.59 * 392640 lacs = 10832937 lacs

Leading banks by market


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capitalization

Banks Majority

shareholding

Market Cap

(Billion $)

Stock Listing

SBI Government 36.6 Mumbai,

London

ICICI Private 25.26 Mumbai, NewYork

PNB Private 7.6 Mumbai

IDBI Government 2.9 Mumbai

HDFC Private 22.2 Mumbai

AXIS Bank Private 11.6 Mumbai,

London

Capital Structure


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Capital Structure

As on 30thJune 2010, the authorized capital is Rs 550 Crore

The paid up capital is 459,60,07,030

HDFC Group holds 23.63% of the banks equity

American Depository shares hold around 17.05% of equity

27.45% is held by Foreign Institutional Investors ( FII)

The bank has about 433078 number of shareholders


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Competitive Analysis


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Indiasbanks have grown at a rapid pace over the past 2 decades after thefinancial liberalization

This growth has still lacked in meeting the massive demand in the need of

financial intermediation. It has led to the growth on non-banking

financing companies (NBFCs) and microfinance companies

Major banks in India are either state owned or previous government

owned institutions which have been fully privatized like ICICI and HDFC

Bank



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State Bank of India (SBI)

SBI is IndiasLargest Bank which is majority owned by the government. The

Company has a number of Subsidiaries and has been a market

outperformer in recent times. Revenues of $22 billion. The SBI has 7

subsidiaries of which 2 have been merged and 5 are remaining

State Bank Bikaner Jaipur

State Bank of Hyderabad

State Bank of Mysore

State Bank of Patiala

State Bank of Travancore



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ICICI Bank

This is the largest Indian Private Bank with operations in all FinancialServices Sectors. The Company has faced a bad time during the Lehmandownturn but has recovered well

Revs of $12.5 billion. ICICI Bank is also strong in almost all sectors of thefinancial industry and has one of the strongest management teams in thecountry

The company which overextended itself in the 2007-2008 boom has nowreduced the size of its risky segments and is again back on the growthtrajectory.



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Punjab National Bank

Punjab National Bank (PNB) , is the second largest PSU bank with about

5000 branches across 764 cities

The Bank like BOB and SBI has shown good growth while at the same time

managed to control bad debt



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Axis Bank

Axis Bank has been the best performing private bank along with HDFC

Bank showing excellent growth in top line and bottom line

The Bank has been expanding into insurance and investment banking

(acquired Enam)

The Bank was promoted jointly by UTI, LIC and other state owned general

insurers



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12.32%

26.34%

16.76%

10.46%

4.05%

30.07%

Market Share

ICICI

HDFC

Axis

Kotak

YES Bank

Others

Growth Rate ICICI Bank


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Growth Rate ICICI Bank

This fiscal's credit growth would be 18 per cent, aided by corporate aswell as retail segment

ICICI Bank has reported a 77.5 per cent jump in its consolidated net profit

at Rs 2,039 crore for the third quarter (Q3) ended December 31, 2010, driven

by a rise in interest income and lower provisioning against bad loans

On stand-alone basis, ICICI Bank's net profit increased 30.5 per cent to Rs

1,437 crore in Q3, from Rs 1,101 crore in the same period a year ago

Growth Rate State Bank of India


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The bank, which controls a quarter of Indian bank loans and depositsalong with its associates, and rivals ICICI Bank and HDFC Bank are seeing

strong demand for loans and asset quality improvement on the back of a

rapidly growing economy

State Bank posted a net profit of 28.28 billion rupees ($620 million) in thefiscal third quarter ended December 2009, versus 24.79 billion rupees

Gross advances grew 22 percent to reach 7.40 trillion rupees as on end-

December 2010 from 2009

The bank's net non-performing asset ratio fell to 1.61 percent in the

quarter from 1.88 percent a year ago as improved consumer and business

sentiment resulted in slowdown in bad loans pile up



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Shares of State Bank of India, valued at $35 billion, rose nearly 24 percentin 2010, compared with a 17 percent rise in the main market and 33 percent

gain in the banking sector index

Growth Rate Punjab National Bank


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Growth Rate Punjab National Bank

The Bank posted a net Profit of Rs.3233 crore during April-December 2010compared to Rs.2770 crore in the corresponding period of previous financial

year registering a YOY growth of 16.7%

Operating Profit for the same nine months stood at Rs 6548 crore as

against Rs 4994 crore in the previous financial year recording a YOY growth of31.1%

Total Business of the Bank crossed the landmark of Rs 5 lakh crore to

reach Rs.5,10,125 crore as compared to Rs. 4,04,373 crore in Dec' 2009,

showing a YOY growth of 26.2%

Deposits of the Bank rose to Rs.2,88,873 crore as on 31.12.2010 as

compared to Rs 2,33,946 crore exhibiting a YOY growth of 23.5%


114/214


115/214

Direct ComparisonHDFC Bank Vs


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Axis BankTotal IncomeQ2 FY2010

HDFC BanksQ2 is Rs.5770.70 Cr which is higher by 7.66% on previous Qtr

Axis Banks Q2 is Rs.4657.49 Cr, which is higher by 7.65% over previous

Qtr

Inference

At this level, Axis has further reduced the Edge of HDFC Bank to just

23.9% - because of higher other income

Axis Bank is scoring in income from investments, income from balances

with RBIs etc, and other Income, whereas, HDFC Bank is scoring well in

respect of Interest on Advances



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Axis Bank

Interest ExpendedQ2 FY2010

HDFC BanksQ2 is Rs.2283.72 Crhigher by 13.11% over previous Qtr

Axis BanksQ2 is Rs.2009.15 Crhigher by 10.89% over previous Qtr

Inference

Axis Bank has a clear edge of 13.67% in respect of lower interest

expended compared to HDFC Bank



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Axis Bank

Employees CostQ2 FY2010

HDFC BanksQ2 is Rs.710.57more by 6.52% over previous Qtr

Axis BanksQ2 is Rs.405.30 Crdown by 2.67% over previous Qtr

Inference

In this expense item, Axis has a huge edge of 75.32% over HDFC Bank



119/214

Axis Bank

Other Operating ExpensesQ2 FY2010

HDFC BanksQ2 is Rs.969.31 Crup by 4.76% over previous Qtr

AxissQ2 is Rs.756.69 Crup by 16.76% over previous Qtr

Inference

Axis Bank has an edge of 28.1% over HDFC Bank in this item of expense



120/214

Axis Bank

Operating ProfitQ2 FY2010

HDFC BanksQ2 is Rs.1807.10 Crhigher by 3.34% over previous Qtr

AxissQ2 is Rs.1486.35 Crhigher by 2.5% over previous Qtr

Inference

HDFC Bank has an edge of 21.58% over Axis Bank at operating level



121/214

Axis Bank

Provisions Q2 FY2010

HDFC BanksQ2 is Rs.454.48 Crdown by 18.11% over previous Qtr

Axis BanksQ2 is Rs.378.76 Crup by 13.74% over previous Qtr

Inference

HDFC Banksprovisions are higher by 19.99% compared to Axis Bank



122/214

Axis Bank

Tax ExpenseQ2 FY2010

HDFC BanksQ2 is Rs.440.48up by 15.31% over previous Qtr

AxissQ2 is Rs.372.45down by 0.73% over previous Qtr

Inference

HDFC Bank pays more tax by 18.27% compared to Axis Bank


123/214



124/214

Axis Bank

Capital Adequacy RatioQ2 FY2010

HDFC BanksCAR is 17 against Axis Banks13.68which gives HDFC Bank an

edge of 24.27%



125/214

Axis Bank

Basic EPSQ2 FY2010

HDFC Bank has a Basic EPS of Rs.19.8 against Axis BanksRs.18.01 - more

by 9.94% over Axis Bank

Inference

At this level, Axis Bank has closed the performance Gap considerably



126/214

Axis Bank

Percentage of Gross/Net NPAQ2 FY2010

HDFC BanksQ2 is 0.3 and Axis BanksQ2 also is 0.34 which is very close for

both



127/214

Axis Bank

Market Price and PE RatioQ2 FY2010 HDFC Bank

The Market Price of HDFC Bank is Rs.2343

HDFC BanksQ2 EPS is Rs.19.8. Annualising this EPS ( x 4) the annual EPS isaround Rs.79.2

The PE Ratio on this Basis is 29.58


128/214



129/214

Axis Bank

Market Price and PE RatioQ2 FY2010 Inference

While HDFC Bank may quote at a premium over Axis based on size, yet, Axis

Bank appears to be quite underpriced for its growth rates at this point of

time


130/214

Key Focus


131/214

Key Focus

Understanding of customers financial needs and providing banking

solutions

Wide range of products and services to cater both retail and wholesale

customer segments

Market Leaders in various products of retail banking such as Credit Cards

and Auto Loans

Main focus on balancing growth with diversified revenues, appropriatemargins and healthy asset quality

Key Focus


132/214

y

Providing financial services to the under banked and rural sector

Helping Farmers with products like Tractor Loan, Kissan Gold Card, Loan

against Warehousing Receipts etc

In line with growth strategy today 30% of the branches are located in rural

and under banked areas

Mission & Objectives


133/214

j

Aim to become World Class Indian Bank

Objective is to build sound customer franchises across distinct businesses

To achieve healthy growth in profitability with the Banks Risk Appetite

To do all this and maintain high level of ethical standards and corporate

governance

Merger with CBoP


134/214

About Centurion Bank of Punjab

Was one of the leading private sector bank in India

Strong nationwide presence with 394 Branches and 452 ATMs in 180 Cities

Employee base of more than 7500

Was listed in major stock exchanges

Strong player in FOREX services, personal loans, mortgages and

agricultural loans

Merger with CBoP


135/214

Reasons of Merger

HDFC wanted to add scale, geography and experienced staff to its

franchise

CBoP was the right fit in terms of culture, strategic intent and approach tobusiness

Merger was Win-Win situation for both the banks

Combined entity became even more strong in the banking market

Merger with CBoP


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Details of Merger

Finalised on 26th Feb., 2008

Swap Ratio of 1:29 (1 share of HDFC Bank for every 29 shares of CBoP

Bank)

Acquisition came for Rs.9510 Crores, one of the largest merger in banking

history of India

Merger was EPS Dilutive for HDFC Bank in the interim

Merger with CBoP


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Details of Merger

Merger gave access of 394 branches of CBoP to HDFC Bank, increasing its

presence in northern and southern India

CBoPsstrong SMEs relationship helped expanding HDFCs Base

Created Indias 7th Largest Bank

Induction of experienced work force in HDFC

Merger with CBoP


138/214

Details of Merger

Nation Wide network of 1148 Branches largest in India

Strong Deposit Base of Rs. 120000 Crores and Net Advances of around Rs.

85000 Crores


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Current Business Strategy


140/214

Develop innovative products and services that attract its targetedcustomers and address inefficiencies in the Indian financial sector

Leverage its technology platform and open scaleable systems to deliver

more products to more customers and to control operating costs

Focus on healthy earnings growth with low volatility

Current Business Strategy


141/214

To increase the market share in the growing banking industry by following adisciplined growth strategy, focusing on quality and not on quantity and

delivering high customer service

To maintain the current high standards for asset quality through disciplined

credit risk

To develop innovative products and services that attract the targeted

customers

To continue developing products and services that reduce the cost of funds.

Segmentation Strategy


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Demographic variables

Location

Targeting the Metro cities and the developing cities

OccupationThey are also focusing on targeting the business men and the salariedclass people

Age

Their main focus is on the middle aged grouped people but they are tryingto attract the senior citizens and the minors also.


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Targeting Strategy


144/214

Target market

Corporate Banking Market

This market target the industries and fulfills the financial needs

Capital Market

This segment is targeted on the long term needs of the individuals

Retail Banking Market

This segment is for retail investors and provides them with short termfinancial credit for personal and household needs.

Positioning strategy


145/214

HDFC has positioned itself as a bank which gives higher standard ofservices through product innovation for the diverse needs of the

individuals and other corporate clients. So they look at highlighting the

following points in their positioning :

Customer centric Service oriented

Product Innovation

Acquisition Strategy


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Customer Segment as an acquisition strategy

Banks are now not targeting customer who want to associate themselveswith foreign banks just for status symbol as it wastes a lot of banksresources

Value Proposition as an acquisition strategy

The bank has to provide world class services to all types of customers if itwants to retain them and increase the value of the bank.

Pricing as an acquisition strategy

HDFC has come up with a strategy of giving better services to itscustomers by reducing the minimum balance requirements. Otherwise ininternational banks the minimum balance required is Rs 10,000 but HDFChas brought it down to Rs 5000

Growth Opportunity Strategy


147/214

It is starting to focus in the rural India and with the countrys GDP is

poised to grow at 8% plus over the next few years, so it has well

positioned itself to take this opportunity to full use

The bank is coming up with innovative offering such as, offering loans

against gold as the gold prices are continuously rising

Giving loans against gold helps them tab business from small shop keepers

as well

It is acquiring banks in the north and south parts of the country which willget them more customers and will help them grow faster

Customer Retention Strategy


148/214

HDFC has started following the below mentioned strategies to retain itscustomer in order to retain its customers

All petty charges for its primes customers have been waived off

Services like locker, de mat etc is now charged at 50% only

The debit card charges have been taken off

The bank keeps updating with the customer as to the new service that

they introduce

Also informs the customer about the charges that have been waived off

Marketing Strategy


149/214

Scientific marketing campaigns are being undertaken using customer data,

usage pattern , preferences etc

The marketing analytics initiatives helps the bank come up with different

ways in which they can measure the efficacy of the campaigns that theyorganize

This also helps then to test or try new campaigns the way they want ,

experimenting with creativesetc.

Other strategies


150/214

Building the trust of the customers

Providing a large number of products and services

Location of the branches and ATMs

Providing customers with services like Home banking, Mobile banking, Net

banking etc


151/214

SCENARIO


152/214

Growth in mortgages, business banking, commercial vehicle loans andauto loans (2010-11)

Customer base grew to 21.9 million customers

Increased its network and product penetration initiatives

Increased visibility of net banking and phone banking

SCENARIO


153/214

Success of banks multi-channel strategy 80% of customer initiatedtransactions serviced through the non-branch channels

Focus on the credit card portfolio

5 million credit cards as of March 2011

NO-LIMIT CREDIT CARDS


154/214

HDFC Bank, the largest credit card issuer in the country, has launchedIndia's first ultra-premium credit card for the UBERrich

Aptly named INFINIA", the card comes with virtually no limits not

just in terms of spend, but also the luxuries such customers are

accustomed to.

The card will be initially offered to a select 5000 individuals.

FOREXPLUS PLATINUM CARD


155/214

Premium Forex card for the Global Indian

Prepaid travellerscard

Chip based card

Best-in-class security

0.5% cash-back on purchases

Offers free lounge access across major international airports

Available for Euro, Dollar and Pound


156/214


157/214

ZAFIN LABS


158/214

Product called miRevenue

Used in the retail business area

Planning to extend the scope

Attained reduction in the time for charging the customers


159/214

Loans


160/214

Available for all new home loan customers of Indian origin applying beforeJanuary 31,2010

Same fixed rate, irrespective of the amount

Very attractive rates compared to the other large players in the marketoffering similar products

Overwhelming response

MOVE IN HOME LOANS


161/214

Available for Readyto moveor Resale properties

Loans are facilitated with minimal delays

Made available quickly

QUICKREMIT


162/214

Online remittance service

From Singapore and UK

Completely online mode to remit money to India, without the need to visit

a bank

Tie-up with DBS Bank in Singapore

Accessible through any bank in UK

HDFCQATAR BANK


163/214

Tied up with the International Bank of Qatar (IBQ) to launch banking

services in Qatar

Allows Indian expatriates in Qatar to access HDFC Banks products and

services

Combination of NRE account in India and NRI account in Qatar facilities

like centralized banking, fee waiver on debit card and remittance services

etc

SWIFT


164/214

Personal loans

Processed in 24 hours

Available for all those who holds an account with HDFC Bank

From September 2011


165/214


166/214

State Bank of India


167/214

State Bank of India (SBI) is the largest nationalized commercial bank in

India in terms of assets, number of branches, deposits, profits and

workforce. With the liberalization of the Indian banking industry in the

mid-1990s, SBI faced stiff competition from the private sector and foreign

banks which resulted in significant loss of its market share.

ICICI Bank


168/214

ICICI Bank Second largest bank in India

Strong diversified financial services franchise in India

ICICI Bank has taken up specific initiatives to ramp up financial literacy aswell as intermediation to the underserved and under-banked segments inboth rural and urban areas

ICICI Bank offers a complete suite of products and services to meet theindividual financial requirements of customer segments. Savings,investments and insurance products are made available to its rural and

agri customer base

The Bank also offers microfinance services to low-income households andcrop loans, farm equipment loans, commodity based loans to farmers.

Axis Bank


169/214

3rd largest private sector bank

Aggressive branch and ATM expansion to 1021 branches and 371 ATMs to

be upcoming in tier II and Tier III cities.

Expanding global reach by way of setting up 3 branch offices in Singapore ,Dubai and Hong Kong and 2 representative offices in Shanghai and Dubai

recently

Axis Bank offers a vast spectrum of services encompassing Large and Mid-

Corporate Banking, SME Banking, Agri-Business Banking, Retail Bankingand International Banking.

Axis Bank


170/214

Axis Bank's network of over 1,200 branches and 4,900 ATMs is spread

across more than 680 cities and towns across the country

Instead of piecemeal efforts of promoting their debit card, the bank has

launched what it calls the first ever filmi Platinum debit and credit card

across 25 cities in India. The objective to offer movie deals on movietickets through one exclusive card. The bank therefore hopes to carve out

a niche in a space not fully explored by competition

Mergers and Acquisitions


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Standard Chartered Acquires ANZ Grindlays Bank (November '00)

Intent

Standard Chartered wanted to capitalise on the high growth forecast forthe Indian economy. It aimed at becoming the world's leading emergingmarkets bank and it thought that acquiring Grindlays would give it a well-established foothold in India and add strength to its managementresources. For ANZ, the deal provided immediate returns to itsshareholders and allowed it to focus on the Australian market. Grindlayshad been a poor performer and the Securities Scam involvement hadmade ANZ willing to wind up.

Benefits

Standard Chartered became the largest foreign bank in India with over 56branches and more than 36% share in the credit card market.



172/214

ICICI Bank Ltd. Acquires Bank of Madura (March '01)

Intent

ICICI Bank Ltd wanted to spread its network, without acquiring RBI's

permission for branch expansion. BoM was a plausible target since its cash

management business was among the top five in terms of volumes. Inaddition, there was a possibility of reorienting its asset profile to enable

better spreads and create a more robust micro-credit system post merger.

BoM wanted a (financially and technologically) strong private sector bank

to add shareholder value, enhance career opportunities for its employees

and provide first rate, technology-based, modern banking services to itscustomers



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Benefits

The branch network of the merged entity increased from 97 to 378, including

97 branches in the rural sector. ICICI gained an additional 1.2 million

customer accounts, besides making an entry into the small and medium

segment. It possessed the largest customer base in the country, thus

enabling the ICICI group to cross-sell different products and services.



174/214

Motives Behind Consolidation

Growth- Organic growth takes time and dynamic firms prefer acquisitionsto grow quickly in size and geographical reach

Synergy- The merged entity, in most cases, has better ability in terms of

both revenue enhancement and cost reduction

Managerial efficiency - Acquirer can better manage the resources of thetarget whose value, in turn, rises after the acquisition

Strategic motives - Two banks with complementary business interests can

strengthen their positions in the market through merger.



175/214

Motives Behind Consolidation

Market entry - Cash rich firms use the acquisition route to buyout an

established player in a new market and then build upon the existing

platform

Tax shields and financial safeguards- Tax concessions act as a catalyst for

a strong bank to acquire distressed banks that have accumulated losses

and unclaimed depreciation benefits in their books

Regulatory intervention - To protect depositors, and prevent the de-stabilisation of the financial services sector, the RBI steps in to force the

merger of a distressed bank.


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177/214

STRENGTH


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Indian banks have compared favourably on growth, asset quality and

profitability with other regional banks over the last few years. The banking

index has grew at a compounded annual rate of over 51 per cent since

April 2001 as compared to a 27 per cent growth in the market index for

the same period

Bank lending has been a significant driver of GDP growth and employment

Extensive reach through vast networking & growing number of branches &

ATMs

The government's regular policy for Indian bank since 1969 has paid rich

dividends with then nationalization of 14 major private banks of India

According to a report by ICRA Limited, a rating agency, the public sectorbanks hold over 75% of total assets of the banking industry, with the

private and foreign banks holding 18.2% and6.5% respectively

WEAKNESS


179/214

PSBs need to fundamentally strengthen institutional skill levels especially

in sales and marketing, service operations, risk management and the

overall organizational performance ethic & strengthen human capital

The cost of intermediation remains high and bank penetration is limited to

only a few customer segments and geographies

Structural weaknesses such as a fragmented industry structure,restrictions on capital availability and deployment, lack of institutional

support infrastructure, restrictive labour laws, weak corporate governance

and ineffective regulations beyond Scheduled Commercial Banks (SCBs)

Refusal to dilute stake in PSU banks: The government has refused to dilute

its stake in PSU banks below 51%

Opposition from Left and resultant cautious approach from the North

Block in terms of approving merger of PSU banks may hamper their

growth prospects in the medium term

OPPORTUNITY Growth driven by new products and services that include opportunities in


180/214

Growth driven by new products and services that include opportunities in

credit cards, consumer finance and wealth management on the retail side,

and in fee-based income and investment banking on the wholesale banking

side

With the growth in the Indian economy expected to be strong for quite

some time especially in retail banking, mortgages and investment services

Reserve Bank of India (RBI) has approved a proposal from the government

to amend the Banking Regulation Act to permit banks to trade in

commodities and commodity derivatives

Given the demographic shifts resulting from changes in age profile and

household income, consumers will increasingly demand enhanced

institutional capabilities and service levels from banks

THREAT


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Threat of stability of the system: failure of some weak banks has often

threatened the stability of the system

Rise in inflation figures which would lead to increase in interest rates

Increase in the number of foreign players would pose a threat to the PSBas well as the private players

Increase in CRR rate


182/214

STRENGTH


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Leader in home loan segment

Right strategy for products

Distribution structure

Brand image

High degree of customer satisfaction

Alliance between HDFC and Standard Life giving a strong brand backing

Robust Risk control Framework

Network of 500 branches and agents across 700 cities


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OPPORTUNITIES


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Untapped rural market

Home loan segment

Fast growing insurance business

THREAT


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Risk of fraud and NPA

Major private players

RBI policies

Increase in funding cost

Economic instability and global crisis


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SWOT - ICICI


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STRENGHTS

ICICI is now a global player in International Banking through its operations

18 countries

ICICI is considered as the pioneer in usage of Internet services for Online

Banking

Advanced infrastructure with sound IT base

SWOT - ICICI


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WEAKNESS

High Bank Service Charges: ICICI bank charges highly to

customers for the services provided by them when compared to other

bank & that is why it is only in the reach of higher class of society

Less Credit Period: ICICI bank provides credit facilities but only upto limited period

SWOT - ICICI


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OPPURTUNITIES

Rise in upper and middle class population due to increase in GDP,

therefore could introduce economical version of their services

Largely unexplored market in regions where only PSBs operate

SWOT - ICICI


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THREATS

ICICI Bank is facing tight competition locally as well as internationally.

Bank like CITI Bank, HSBC, ABM, Standard Chartered, HDFC also provide

equivalent facilities like ICICI do and also ICICI do not have consistency in

its international operation

ICICI levies higher service charges for various transactions making it

expensive for major sections of the society

ICICI Bank provides all services through electronic computerized machines.

This creates problems to the less educated people

SWOTAxis Bank


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STRENGTH

Banking Services Include Corporate Credit, Retail Banking, Business

Banking, Capital Markets, Treasury And International Banking

Sound technological platform with Centralized Database and Operations

Corporate Banking: Current Account deposits grew by 24%yoy, from Rs.

20,045 cr as at end March08 to Rs. 24,822crores as at end March09 Retail Banking: Savings Bank Deposits Grew To Rs. 25,822 cr.

On 31st March 2009 From Rs. 19,982 Cr. As On 31st March2008 Showing A

Year On Year Growth Of 29%

SWOTAxis Bank


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WEAKNESS

Market capitalization is very low

Not having Image UTI (fraud)

Higher cost

Customer service

SWOTAxis Bank


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OPPORTUNITY

Large retail and corporate market

Wide scope in rural India

Other Activity (Non Banking Activity)

People are become more service oriented


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SWOT - Yes Bank


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STRENGTH

High Quality, Customer Centric, Service Driven, Private Indian Bank

Catering To The FutureIndustries Of India

The bank has adopted International Best Practices, the highest standard of

service, quality and operational excellence

Credible And Transparent Performance Management Process Total Deposits Rs 1,61,694 million

Net Advances Rs 124,031 million

Net NPA 0.33%

SWOT - Yes Bank


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WEAKNESS

Less wide network

Not in every state

Less promotional activity

Unknown brand

SWOT - Yes Bank


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OPPORTUNITY

Very wide market

Other activity(insurance, stock broking, mutual fund)

Wide scope in rural area

SWOT - Yes Bank


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THREAT

Very high competition Private bank market (ICICI Bank, HDFC bank), In

public sector (BOB, PNB)

Government Policy

Other better Saving, investment option available (like Insurance, Mutual

fund, Real-estate, Gold)

SWOT - SBI


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STRENGTH

Strong domestic market position, sustaining reach and customer

confidence

SBS merger further hastens SBI and its associate banks merger and

helping defend its leadership position

Wide Distribution Network: Excellent penetration in the country withmore than 10000 core branches and more than 5100 branches of

associate banks (subsidiaries)

Government owns 60% stake in SBI. This gives SBI an edge over private

banks in terms of customer security

SBI offers very low transition costs which attracts small customers


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SWOT - SBI

OPPORTUNITIES


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OPPORTUNITIES

SBI could be the highest beneficiary from increasing adoption of E-

transactions

Investment in information technology will decrease transaction cost

Growth in general insurance will help increasing market share

Merger of all the associate banks (like SBH, SBM, etc) into SBI will create amega bank which streamlines operations and unlocks value

Planning to add 2000 branches and 3000 ATMs in 2008-2009. This will

further increase its reach

SWOT - SBI

THREATS


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THREATS

Opening of Indian Banking Sector in 2009 will cause intense competition.Large numbers of MNC banks are mushrooming in the Indian market dueto the friendly policies adopted by the government. This can increase thelevel of competition and prove a potential threat for the market shareof SBI bank

Large numbers of MNC banks are mushrooming in the Indian market dueto the friendly policies adopted by the government. This can increase thelevel of competition and prove a potential threat for the market shareof SBI bank

Private banks have started venturing into the rural and semi-urban sector,which used to be the bastion of the State Bank and other PSU banks

here was an employee strike in the year 2006 which disrupted SBIsactivities. This can be repeated in the future


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PORTERs 5 Force ModelINDIAN BANKING INDUSTRY

Large no of banks

High market growth rate

L it hi t

Non banking financialsector increasing rapidly

Deposits in posts

Bargaining power ofconsumer is very high

Large no of alternatives


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Low switching costs

Undifferentiated servicesHigh fixed cost

High exit barriers

Threat ofcompetitors

Deposits in posts

Stock MarketMutual Fund

Threat ofSubstitute

Large no. of alternatives

Low switching costsUndifferentiated services

Full information

Threat ofBuyer

Nature of suppliers

Few alternatives

RBI rules and regulations

Suppliers are notconcentrated forwardintegration

Threat ofSupplier

Product differentiation isvery difficult

Licensing requirement

Threat ofNew Entrants

Past Strategies of HDFCIntroduction of FIVE S , PART OF KAIZEN WORK PLACE TRANSFORMATION


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focuses on effective work place organization and believes in Small changes leadto large improvement.

S-1 SORT

SEIRI

S-2SYSTEMATIZ

E SEITON

S-3 SPIC-N-

SPAN SEIRO

S-4

STANDARDIZ

E SEIKETSU

S-5 SUSTAIN

SHITSUKE

SORT- It focus on eliminating unnecessary items from the work place. It

i ll f l bl fl I i

5 S of Kaizen


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is excellent way to free up valuable floor space. It segregate items as per

require and wanted. Frequently Less Required Frequently Remove

Required everything from workplace Wanted but not Required Junk

SYSTEMATIZE - Systematize is focus on efficient and effective Storage

method. That means it identify, organize and arrange retrieval. It largely

focus on good labelling and identification practices. Objective :- Aplace

for everything and everything in its place

SPIC- n SPAN - Spic-n-Span focuses on regular clearing and self

inspection. It brings in the sense of ownership

STANDERDIZE - It focus on simplification and standardization. It involve

5 S of Kaizen


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standard rules and policies. It establish checklist to facilitatesautonomous maintenance of workplace. It assign responsibility for doing

various jobs

SUSTAIN- It focuses on defining a new status and standard of organized

work place. Sustain means regular training to maintain standardsdeveloped. It brings in self- discipline and commitment towards

workplace organization


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Successful Strategies

Best practices in terms of product offerings technology service levels risk


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Best practices in terms of product offerings, technology, service levels, risk

management and audit & compliance

Develop new product and technology is the main business strategy

Increase market share in Indias expanding banking and financial servicesindustry by following a disciplined growth strategy focusing on quality and

not on quantity and delivering high quality customer service.

Leverage our technology platform and open scalable systems to deliver

Successful Strategies


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Leverage our technology platform and open scalable systems to deliver

more products to more customers and to control operating costs

Develop innovative products and services that attract the targeted

customers that reduce bankscost of funds

Focus on high earnings growth with low volatility

Where Did They Go Wrong?

FOCUS ONLY ON HIGH END CUSTOMERS: The bank targets only the top


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FOCUS ONLY ON HIGH END CUSTOMERS: The bank targets only the top

bracket of clients and does not cater to the needs of small customers. Dueto this reason the bank may sometimes loose good clients

Not Equal to International Standard

Highly depended on individuals loans

Major Stake held by American financial group which are under stress in

economic slow down

Where Did They Go Wrong?

Managerial international presence


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Managerial international presence

No next line of leadership

Lack of infrastructure in rural area

Minimum balance to open a account is very high

Extension overseas holds lots of risk

Credit card department is not active


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THANK YOU

hdfc bank strategy

Documents