Strategic analysis hdfc bank

CHARVI PANDEY
AAYUSHI SRIVASTAVA
RAVI KUMAR
SHAGUN JHALANI
NAV KRISHNA CHAUDHARY
KAINESH PATEL
MILAN SHAMBHARKAR
1

2
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
y = 6.0168x - 7E+09
R² = 0.9328
-
200
400
600
800
1,000
1,200
1,400
1,600
1,100 1,150 1,200 1,250 1,300 1,350
NumberofAccounts
Millions
Population
Millions
Number of Accounts vs Population
y = 9E+09x - 5E+09
R² = 0.8815
-
200
400
600
800
1,000
1,200
1,400
1,600
62.00% 63.00% 64.00% 65.00% 66.00% 67.00% 68.00% 69.00% 70.00% 71.00% 72.00% 73.00%
Millions Literacy rate
No. of Bank Accounts vs Literacy rate

3
y = 7.7827x + 5E+08
R² = 0.8538
0
200
400
600
800
1000
1200
1400
1600
1800
2000
0 50 100 150 200
Millions
Millions
Online Transactions vs Smartphone Users
y = 0.0973x + 0.0213
R² = 0.2522
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00%
NIM vs GDP Growth rate
y = -0.05x + 0.0329
R² = 0.1153
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%
NIM vs Inflation
Macroeconomic Analysis

4
Industry Performance Parameters
0
1
2
3
4
5
6
7
8
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
NPAs as % of Total Loans
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Net Interest Margin
0
1
2
3
4
5
6
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Loan/Deposit ratio
0
0.2
0.4
0.6
0.8
1
1.2
2011 2012 2013 2014 2015 2016
ROA
0
2
4
6
8
10
12
14
16
2011 2012 2013 2014 2015
ROE

5
Industry Analysis
428
587 602
684
864
984 969 994 983
1016
0
200
400
600
800
1000
1200
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Growth in Credit off-take (USD Bn)
495
597
819 857
977
1174
1342 1313 1349
1479 1466
0
200
400
600
800
1000
1200
1400
1600
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Growth in Deposits (USD Bn)
57.6
67.1
76.4
103.4 102.17 102.88
110.74
17.9 18.2 20.2
28.7 30.65 31.38 34.12
6.4 5.8 5.9 7.68 7.78 7.6 8.26
0
20
40
60
80
100
120
2009 2010 2011 2012 2013 2014 2015
Interest Income Growth
Public Private Foreign
8.9
10.2 10
10.7 10.5 10.8
12.39
3.7
4.3 4.3
5.3 5.5 5.9
6.7
3.1
2.1 2.3 2.3 2.1 2.2 2.4
0
2
4
6
8
10
12
14
2009 2010 2011 2012 2013 2014 2015
Other income growth in indian banking sector
Public Private Foreign

6
Industry Analysis
0
0.5
1
1.5
2
2.5
SBI & its associates Nationalised bank Public sector banks Private sector banks Foreign banks
ROA
2012 2013 2014 2015
3.53%
3.38%
2.44% 2.47% 2.54%
3.08% 3.03%
2.87%
2.74%
2.64%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Net Interest margin over years

7
Industry Analysis – Porter’s Five Forces
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).
0
2
4
6
8
10
12
14
16
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Commercial bank branches (per 100,000 adults) Bargaining buyer of suppliers:
Moderate
• Investors who are ready to bear
high risk have higher return
options like equity and real
estate while risk averse investors
prefer banks.
• The reach of banks is widest
amongst the different
instruments.
0
0.002
0.004
0.006
0.008
0.01
0.012
0.014
0.016
0.018
0.02
2009 2010 2011 2012 2013 2014
HNI as % of total accounts

8
0
1
2
3
4
5
6
7
8
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
(Lending - Repo) rate
0
0.005
0.01
0.015
0.02
0.025
0.03
0.035
0.04
2004 2006 2008 2010 2012 2014 2016 2018
No of branches/sq. km.
Buyers
Corporate Retail
SME (Low) MME(High-Med) Large Corporates(High) HNI (High) Middle (Moderate) Low (Low)
Bargaining Power Of Buyers:

9
Threat of Substitutes: Moderate
• Real Estate, Gold, Bonds, Equity, hybrid financial
instruments
Deposit Side – equity returns are higher than banks, Gold
returns have also been higher and culturally are investing
in gold and real estate as they provide tangible feel to an
asset.
Lending Side – Retail borrowers do not have many
substitutes. Corporate borrowers have the options of
corporate bond markets.
Equity
Real estate
Bonds
Gold
FD
-5
0
5
10
15
20
25
30
35
40
0 2 4 6 8 10 12 14 16
Riskasscociated
Average Returns in Last 5 years
Risk vs Return of various instruments
Competitive Rivalry: High
Exit Barriers – very high
Product differences – corporate and retail and fee vs non-fee focus
Year
No of
branches
No of
branches/s
q. km.
2005 70373 0.02140949
2006 72072 0.02192638
2007 74653 0.02271159
2008 78787 0.02396927
2009 82897 0.02521965
2010 88203 0.02683389
2011 94019 0.02860329
2012 102377 0.03114603
2013 109811 0.03340767
2014 112375 0.03418771
2015 113144 0.03442166
2016 114665 0.03488439

Submitted to Prof. K.C. Balodi 10
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

11
0.00
50,000.00
100,000.00
150,000.00
200,000.00
250,000.00
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
TotalIncome(Rs.Crore)
Total Income
HDFC Bank ICICI Bank Kotak Mahindra Bank SBI
0.00
20,000.00
40,000.00
60,000.00
80,000.00
100,000.00
120,000.00
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
CostofFunds(Rs.Crore)
Cost of Funds
0
5000
10000
15000
20000
25000
30000
35000
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
SGA(Rs.Crore)
SGA
0.00
2,000.00
4,000.00
6,000.00
8,000.00
10,000.00
12,000.00
14,000.00
16,000.00
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
NetIncome(Rs.Crore)
Net Income

12
0.00
500,000.00
1,000,000.00
1,500,000.00
2,000,000.00
2,500,000.00
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
TotalAssets(Rs.Crore)
Total Assets
0.00
500,000.00
1,000,000.00
1,500,000.00
2,000,000.00
2,500,000.00
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
CurrentAssets(Rs.Crore)
Current Assets
0.00
200,000.00
400,000.00
600,000.00
800,000.00
1,000,000.00
1,200,000.00
1,400,000.00
1,600,000.00
1,800,000.00
2,000,000.00
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
Deposits(rs.Crore)
Deposits
0
20000
40000
60000
80000
100000
120000
140000
160000
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
TotalStockholderEquity(Rs.Crore)
Total Stockholder Equity

0
1
2
3
4
5
6
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
GrossMargin(%)
Net Interest Margin (%)
0
50
100
150
200
250
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
EPS(Rs.)
EPS
0.00
5.00
10.00
15.00
20.00
25.00
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
CRAR
0.00
10.00
20.00
30.00
40.00
50.00
60.00
2010-11 2011-12 2012-13 2013-14 2014-15
CASA

Submitted to Prof. K.C. Balodi
14
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
All Banks SBI HDFC Bank ICICI Bank Kotak Mahindra Bank
Profitability Analysis
NIM (%) COF (%) ROE (%)
-
50
100
150
200
250
300
350
SBI HDFC Bank ICICI Bank Citi Central
Bank of
India
Canara
Bank
Bank of
Baroda
PNB Kotak
Mahindra
Bank
IndusInd
Bank
Yes Bank Standard
Chartered
Bank
OnlineTransactionVolume/TotalIncome($MM)
Bankwise Online Transactions/Total Income
NEFT RTGS ECS Mobile
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
-
5
10
15
20
25
SBI HDFC Bank ICICI Bank Kotak Mahindra Bank
TotalAssets(Rs.MM)
Millions
Efficiency in Deployment of Assets
Total Assets (Rs. MM) ROA
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
-
50
100
150
200
250
SBI HDFC Bank ICICI Bank Kotak Mahindra
Bank
(Rs.MM)
Thousands
Size vs Profit/Employee
# of Branches+Offices # of Employees
Profit/Employee (Rs. MM)

-
50
100
150
200
250
300
Millions
Level of Digitization
Mobile Transactions Online Txns
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
Thousands
Fee vs Float Income
Core Fee Income (Rs. MM) Interest Income (Rs. MM)
-
5
10
15
20
25
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
TotalAssets(Rs.MM)
Millions
NPA
Total Assets (Rs. MM) ROA GNPA Ratio

16
Key Success Factors – HDFC Bank
Focus on Technology and Digitization
• Beyond Internet Banking, Mobile Banking and ATM
• Online Loan Approval
• Mobile Banking without Internet
• Opening Accounts Online
• Online Tax Filing
• Humanoids(to capture more data, lower cost and speed up)
• Analytics
(Info: HDFC netbanking offers 200 services and there are 180%
increase in users over previous years. HDFC banks charges fees
if cash transactions are done.)
Why to focus on technology?
• Higher mobile and internet penetration
• Lower cost of data plan
• Shift from brick and mortar retail to e-retail
Wide Range Offerings/ Value Added Services:
• Demat Account/ Mutual Funds
• Insurance
• National Pension Scheme/ Atal Pension Yojana
• 16 lakhs Jan Dhan accounts(highest in private sector by
HDFC)
• Flights, Hotel Bookings and other shopping
• Kisan Dhan Vikas Kendra(app for farmers)
• Phone Recharge directly by giving a missed call
• Free soil check up for farmer account holders
Better corporate governance:
• Merit based lending to have lower NPAs (Better risk
management and audit and compliance)
• This will lead to higher crediting rating of bank and that will
lead to lesser borrowing rate
Right People:
• Recruiting and Training
• Career Management
• Employee and customer engagement
• Rewards
• Code of Ethics and Business Conduct
Balancing across dimensions
• Rural vs Urban
• Rural households are 68% of total households,
• Right mix of product, technology and service support
• Kisan Gold Credit Card, Kisan Tez (instant loan
approval), Kisan Dhan Shakti account
• Large Corporates vs SMEs
• Provide a services ranging from working capital loan, term
finance, trade services, cash management, investment
banking services, forex, salary account tie-ups
• Government Tieups
• Tax collection - direct, indirect, excise, state tax
TechnologicalLeadershipProductSuites
SegmentFocus
Corporate
Governance&
InternalPolicies

Opportunities - HDFC Bank
0
2
4
6
8
10
12
14
16
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Millions
Disposable Income (in Millions)
14400
14600
14800
15000
15200
15400
15600
15800
16000
16200
1 2 3 4 5
Agriculture, Forestry and Fishing (Rs. in Billion)
2011 2012 2013 2014 2015
• Household disposable income- in rural India is forecasted to grow at a CAGR
of 3.6 per cent over the next 15 years
• Indian agriculture, forestry & fishing sector has grown at a fast pace,
clocking a CAGR of 8.13 per cent over FY09-16
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
2011 2012 2013 2014 2015
Retuns Across Asset Classes
Equity Returns Real Estate Returns Bond Returns Gold Returns FD Return
• Under banked as a nation, people with wealth keep money in gold and real
estate
0
50
100
150
200
250
2011 2012 2013 2014 2015 2016
Smartphone Users (MM)
• Mobile and Internet penetration is increasing day by day
• Local money-lending practices involve interest rates well above 30 per cent, therefore making bank credit a compelling alternative

18
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

Customer Focus &
Customer driven
Ethical standards &
professional Integrity
People & Sustainability
Corporate governance
Vision: Analysis of Strategic Intent - Core Values (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 – Core Purpose (Core Ideology)

21
BHAG
To grow at 30% in
terms of deposits
and loans.
To increase
market share to
50% (from 80+
banks) by 2020 in
terms of loans,
deposits and
credit car lending.
To be in top 100
banks globally
To have branches
to 10,000 by 2020
(with 75 % located
in rural and semi-
urban branches)
Vision: Analysis of Strategic Intent – BHAG (Envisioned Future)

22
Vivid Description
Vision: Analysis of Strategic Intent – Vivid Description (Envisioned Future)
I dream of every Indian to own their homes.
- Hasmukh T. Parekh
(Founder and Padma Bhushan Awardee)
Background:
• No home loans in 1990s.
• Only good time to buy homes was post retirement – due to
gratuity and EPF payment received.
• High cash component up to 70% in purchase of houses.
Now:
Home loan approval in 24 hrs.
with multiple banks and
NBFCs willingness to offer.

23
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.”
Mission: Analysis of Strategic Intent

24
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.
Mission: Components

1998
1999
2001
2012
2015
2016
FIRST ATM
INTERNATIONAL
DEBIT CARD
CREDIT
CARD
BUSINESS
GOLD
LOAN
VALUE
ADDED
APPS
ROBOT
DEPLOY-
MENT AT
BRANCHES
2000
2000
2003
NA
2016
2016
Product Suite : Launch Trend

Trends in Internal Environmental factors
HDFC bank is the highest valued brand in India
1. BRAND

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

0
5000
10000
15000
20000
25000
30000
2011 2012 2013 2014 2015
Online transactions as a percentage of total
income
3. TECHNOLOGICAL CAPABILITY
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.
-
50
100
150
200
250
SBI HDFC
Bank
ICICI Bank Central
Bank of
India
Canara
Bank
Bank of
Baroda
PNB Kotak
Mahindra
Bank
IndusInd
Bank
Yes Bank Standard
Chartered
Bank
OnlineTransactionVolume/TotalIncome($
MM)
Bankwise Online Transactions/Total Income
NEFT RTGS ECS Mobile

4. CORPORATE GOVERNANCE NORMS &
PRACTICES
5. MERCHANT TIE-UPS
After SBI, HDFC bank has the highest number of POS
terminals indicating strong merchant tie-ups
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
association
• Award for Best corporate governance practice by BSE

VRIO Framework: Competitive Advantage
SUSTAINABLE

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

32
Distinctive Competencies
1. Market leader in online transactions because by
leveraging customized ERP integrations to high-end
SAP certified solutions
2. Disciplined Credit Monitoring and strong culture of
corporate governance
3. Brand equity because of high quality service and
relationship management
4. Employee equity by leveraging performance
management system and T&D programs to maximize
5. Extensive merchant tie-ups to offer best-in-class
customer service
6. Offer greater customer choice, flexibility and
convenience to increase the retail business
0
214 151
317
1041
1721
32
64 37 115
560
965
0
500
1000
1500
2000
Mobile banking volumes rise faster value keeps apace
VOLUME (000) VALUE ($ million)
44%
55%
68%
0%
10%
20%
30%
40%
50%
60%
70%
80%
2013 2014 2015
HDFC’s Internet And Mobile Transactions

33
efficient corporate governance
customer service
-
5
10
15
20
25
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
TotalAssets(Rs.MM)
Millions
NPA
Total Assets (Rs. MM) ROA GNPA Ratio
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

34
customer service
0%
20%
40%
60%
80%
100%
2010-11 2011-12 2012-13 2013-14 2014-15
62%
79%
86%
95% 98%
CUSTOMERSERVICEINDEX
CUSTOMER SERVICE INDEX

35
customer service

36
customer service

37
customer service
2558 3046 3408 4014
8913
10743 11256 11766
0
2000
4000
6000
8000
10000
12000
14000
2012 2013 2014 2015
YEARS
ATM to Branch Ratio is 3:1
Branches ATMs
0
1
2
3
4
5
6
7
2011 2012 2013 2014 2015 2016
Retail Deposits/Total Revenue
SBI ICICI HDFC

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

39
0.00
500,000.00
1,000,000.00
1,500,000.00
2,000,000.00
2,500,000.00
TotalAssets(Rs.Crore)
Total Assets
Competitive Analysis: Strategic Group
0.00
500,000.00
1,000,000.00
1,500,000.00
2,000,000.00
2,500,000.00
CurrentAssets(Rs.Crore)
Current Assets
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
InPercent
Net NPA
0.00
5.00
10.00
15.00
20.00
25.00
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
InPercent
Axis Title
Wages/Total expense

0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
RsinMillion
Axis Title
Business per Employee
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
InPercent
Axis Title
Cost of Funds
0
500
1000
1500
2000
2500
3000
3500
4000
4500
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
Inmillion
Business per office
Competitive Analysis: Strategic Group
40

HIGH LEVERAGE OF
DIGITAL TECHNOLOGY
BRAND
CUSTOMER SERVICE
NATIONAL GEOGRAPHIC
PRESENCE
LOWER FUNDS COST
MOTIVATED WORKFORCE
CORPORATE GOVERNANCE
WIDE PRODUCT
OFFERINGS
STRENGTHS
Leadership Team
Aditya Puri
Best Indian CEO, 2015
By Business World

Weakness
HDFC cannot enjoy first mover
advantage in rural areas. Other
major competitors like SBI, ICICI
and other nationalised banks have
huge penetration for a very long
time. Rural people are hard core
loyals in terms of banking services
Since it’s non nationalized bank,
many government key accounts
like GOI, state governments. Tax
departments, excise departments,
PSUs are held by SBI or similar
PSBs.
Weaker support by both national
government, RBI and
international govt. for
international branch expansion.
SBI and EXIM has always been
given preferences.

RELATED
HORIZONTAL
DIVERSIFICATION
43
Corporate Strategy
ORGANIC
INORGANIC EXPANSION
ATTEMPTS

GLOBAL PUREPLAY GLOBAAL RETAIL/COMMERCIAL GLOBAL UNIVERSAL
MULTI-COUTRY PURE PLAY MULTI-COUNTRY
RETAIL/COMMERCIAL
MULTI-COUNTRY UNIVERSAL
LOCAL PURE PLAY LOCAL RETAIL/COMMERCIAL LOCAL UNIVERSAL
Global
Multi-country
Local
UniversalRetail/CommercialPure Play
Ansoff Extended Matrix
Market
Product

45
Strategic Motives for Diversification - Related
Value
Creation
Economies of
Scope
Operation
Relatedness
Corporate
Relatedness
Market Power–
Pooled
negotiating
power
Value Neutral
Defensive Strategy –
Threat to small players
due to mature product line
• Network Effect with more service outlets
provides differentiation
• Economies of Scale lower costs by
• Efficient Capital Allocation
• 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
• Transferring Skills
• Large customer database provides for better
customer insights and learnings

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

1994-
Treasury,
State of
art dealing
room
1997-
Interconnectivity
between all
branches, signed as
a DP participant,
telebanking, interest
rate options,
interest rate and
foreign currency
swaps
1998 –
ATM’s linked
to all 3 major
payment
systems,
launch debit
card
2000 – acquired Times
Bank, launched DP
services on net,
introduced education
loan, launched HDFC
securities, introduces
internet banking,
launch credit card
2001 –
launched
ADR’s
2002 – launched
wealth
management
programme
2003- RFC,
tie up with
IRCTC for
tickets,
began
selling
home loans
for HDFC
2004 – tie
up with
NMCE for
warehouse
receipts
2005 –
Credit card
for farmers
2010 –
Introduces
variable
interest
rates to
attract long
term
deposits on
RD’s,
2011 –
Intensifying
mobile
banking
services,
2014 –
online
payment
gateway tie
up with IIM
Lucknow
47
Economic
Logic
Arenas
Vehicles
Differentiators
Staging
171 231 312 467 535 684 761
1412 1725 1986
2544
3062 3403
4014
4520
479 732 910 1147 1323 1605 1977
3295
4232
5471
8913
10743
11256
11766 12000
0
2000
4000
6000
8000
10000
12000
14000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Branch and ATM Coverage
No. of branches No. of ATM's

48
Economic
Logic
Arenas
Vehicles
Differentiators
Staging• Market leader in online transactions
because by leveraging customized ERP
integrations to high-end SAP certified
solutions,
• One of the lowest interest rates in market
due to very efficient credit monitoring,
• Brand equity because of high quality service
and relationship management,
• Employee equity by leveraging performance
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.
Premium Prices due to unmatchable
services
Internal Development:
• Primarily Internal
Growth
• Two sole acquisitions;
Times Bank Ltd (2000),
Centurion Bank of
Punjab (2008)

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

50
Economic
Logic
Arenas
Vehicles
Differentiators
Staging
Elements Of Strategy
To become a global bank, 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 maximize
margins
U.S.->Europe->Mexico-
>Korea->Poland->China-
>Turkey->Chile->Central
America->APAC
• Retail Banking: Extensive rewards in credit card
programs (Air travel, airport services, reward
points), Multiple merchant tie-ups (esp. with e-
commerce players like BookMyShow,
MakeMyTrip), Citi Priority and Citi Gold accounts,
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
transactions
• Joint ventures: mobile
money venture with SK
telecom, Subsidiaries,
M&A (eg. First American
bank, Washington mutual
finance corp, etc.)
• Product/Business: Corporate banking,
NRI banking, Personal banking, SME
banking, Retail Services, Retail Banking,
Commercial Banking, Branded Cards
and Investment Banking
• Geographical: Asia (APAC); Europe, the
Middle East and Africa (EMEA); Latin
America; and North America
• Market: Large Corporates, MMEs,
SMEs, Retail bank account holders (Mid
and High income)

51
Elements of Strategy Comparison
Element HDFC SBI Citi
Arena Products:- Loan products, Deposit
Products, Commercial Banking,
Investment banking, Transactional
products, bill payments, depository
services, mutual funds.
Geography:- India
Market:-
• Large corporate,
Medium/Emerging corporates,
Financial Institutions, PSU’s,
Retail Clients
Products:- Personal banking, Rural
banking, small and medium
enterprises, Corporate banking,
government business, Mutual
funds, Investment banking
Geography:-
37 countries across east and south
Asia, middle east, Africa, Australia
Market:-
• Large corporate,
Medium/Emerging corporates,
Financial Institutions,
Government, PSU’s, Retail
Clients
Products:- Corporate banking, NRI
banking, Personal banking, SME
banking, Retail Services, Retail
Banking, Commercial Banking,
Branded Cards, Investment Banking
Geography:-
Asia (APAC); Europe, the Middle
East and Africa (EMEA); Latin
America; and North America
Market:-
Large Corporates, MMEs, SMEs,
Retail bank account holders (Mid
and High income)

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

53
Links between Business Strategy and Previous Elements
Elements of Business
Strategy
Business Strategy External Environment Internal Environment
Arena
Technological Leadership Internet and mobile penetration
Technological infrastructure and data
analytics
Geographical expansion in tier 3 to tier 6 cities Regulatory requirement Brand Equity
Focus on retail accounts
Increase in working age population
and disposable income
Extensive merchant tie ups and best in class
customer service
Increase in agricultural lending and products
for agriculture and SME’s
Government emphasis on priority
sector lending
Strong product portfolio
Vehicle Internal Development
Not doing acquisition because PSB’s
cannot be taken over easily and there
are not many sector targets
Strong brand and availability of full product
suite and geographical expansion can be
done easily
Differentiator Disciplined Credit Monitoring
Decline in asset quality and adverse
investment cycle
Employee equity and corporate governance
Staging Staging Low banking penetration in India
Technological leadership and employee
equity
Economic Logic Economic Logic
Increase in high earning individuals
who want better service
Best in class service and one of the lowest
cost of funds in industry

54
Strategic Canvas
LOW
MEDIUM
HIGH
CUSTOMER
SERVICE
DIGITAL
INNOVATION
BREADTH OF
PRODUCT
OFFERING
DEPOSIT RISK CREDIT
MONITORING
SCALE CSR ACTIVITIES EASE OF BANKING UBIQUITY LOAN, ASSEST
MANAGMENT
FOCUS
NET BANKING GEOGRAPHICAL
COVERAGE
ATMOSPHERE
Offerings
Strategic Canvas
HDFC Bank SBI Bank NBFI

55
Key Evaluation Criteria Questions Answer
1. Does your strategy exploit
your key Resources
a.) Does this strategy give you an advantageous
position relative to your competitors
b.) Can you pursue this strategy more
economically than competitors
a.) Yes, it gives us a premium positioning with the largest
reach and strong growth potential
b.) Yes, because we have the best credit monitoring and
one of the lowest cost of funds in industry
2. Does your strategy fit with
Current industry Conditions
a.) Are you aligned with the key success factors of
your industry
a.) Yes, we have technological leadership, cost leadership
in funds and best credit monitoring processes
3. Will your differentiators be
sustainable?
a.) Will competitors have difficulty imitating you? a.) Yes in credit monitoring services but no in technology.
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
difficulty imitating you?
a.) Whether elements of strategy reinforce each
other?
a.) Yes
5. Can your strategy
be implemented?
a.) Will your stakeholders allow you to pursue this
strategy?
b.)Do you have the proper complement of
implementation levers in place?
a.) Yes, we have provided the best returns in industry
b.) Yes, we hire the best talent pool, we have
implemented the best technology, brand and best
leadership.
Testing the Quality of Strategy

56
Profit Pool
PROFITMARGIN
REVENUE SHARE

Submitted to Prof. K.C. Balodi
57
Recommendations
Acquisitions and Strategic Alliances
• Highly Fragmented Industry (152 Scheduled Commercial Banks and micro
finance companies)
• Mature Product Line
• High exit barriers
Enter M-wallets Mobile transactions / Total income is lower than other banks in strategic group
33 44 76
123.3
167.9
204.1
0
200
400
2011 2012 2013 2014 2015 2016
Smartphone
Users (MM)
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.

58
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

59
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

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