Balancing growth with stable margins & asset quality helped create value: HDFC Bank

HDFC Bank has been one of the biggest wealth creators and it is one of the opportunities that Raamdeo Agrawal of Motilal Oswal spotted very early on.

Paresh Sukthankar, Deputy Managing Director, HDFC Bank in an discussion with CNBC-TV18 and Raamdeo Agrwal said, one element that has helped them create value over the years has been execution of their strategy, which involved balancing growth with relatively stable margins and asset quality, said Sukthankar.

When Agrawal asked what the bank had done different than other private sector banks, Sukthankar said what went right for them was they build a diversified business. He said, “We recognised that banking goes through its own cycles, there are segments which see a spurt of growth and others go into a shell at point of time. So we build a loan book that is roughly half-half between wholesale and retail,” adding that this strategy helped them to be well positioned to capture growth either from consumption side or investment cycle picking up.

The bank also build a respected deposit franchise, which gave them a stable and low cost funding and also a customer base to whom they could cross sell a range of products, he said.

They also had other ingredients in place like strong brand, technology and people, said Sukthankar. So, if one were to put all this together then perhaps the secret sauce has been culture of the bank, with a strong leadership of Mr Aditya Puri ensuring that nobody has the chance of getting complacent or hubris.

He also specified that for any huge organisation, leadership is important in terms of vision and face of the organisation but the success is also because of the success of layers of leadership across senior management, middle management, junior management and so on.

Talking on the outlook for private sector banks going forward, he said there is no doubt that they will gain market share in a growing market.