HDFC Bank flies on success mantra

Loan growth in India is expected to ease to around 15 percent in fiscal 2012/13 from over 20 percent in 2009/2010 as a flagging economy and high interest rates dent demand.

Indeed, loan growth at the bank has slowed and retail deposits, its biggest strength, have shifted slightly to smaller competitors offering much higher interest rates.

"If balance-sheet growth remains slow, then maintaining 30 percent profit growth will not be easy", said Manish Ostwal, a sector analyst with Mumbai-based brokerage K.R. Choksey.

HDFC Bank hopes to grow market share and is charging into India's hinterland, where millions still have no bank accounts.

Still, the lender's old-school approach will stand it in good stead when good times return, say analysts and investors.

It has largely stayed away from project finance, in contrast with several other banks that lent heavily to India's power and infrastructure projects during the pre-2008 boom period.

The bank's infrastructure funding is largely limited to working capital loans to contractors of project developers, keeping exposures smaller, shorter and relatively safer.

"There is talk in trade circles that the country's No.3 lender may be losing money in its aggressive investment banking push. The bank insists the reality is far from it. We don't do businesses to lose money", said Sukthankar.

Over the past year, HDFC Bank has hired five senior executives and has ambitions of soon getting into equity offerings. It already has several million-dollar deals to show from the country's top corporate houses and is intent on pushing old-time players off the league tables.

"HDFC Bank has been solid, other banks may have more risks coming", said Taina Erajuuri, a Helsinki-based portfolio manager at FIM India, which owns shares in HDFC Bank. If you want peace of mind, this is the bank for you.

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