HDFC Bank Ltd. ADRHDB

Morningstar Rating

Stock Research and Analysis

by Maclovio Pina

As one of India's largest non-government-owned banks, HDFC Bank has profitably grown throughout the last decade and benefited tremendously from India's booming economy. Despite the current global crisis and the slowdown it will likely cause in India, Read more

Bulls Say

India has attractive long-term growth prospects. As one of the largest financial institutions in this country, HDFC is set to profitably supply the financial resources needed for this development.

HDFC has decent lending standards, with nonperforming loans at less than 2% of the total. This should shield returns from massive loan losses. Read more

Bears Say

Nearly one fourth of HDFC's loan portfolio is government-directed to certain agricultural and small businesses deemed "priority sectors." In our view, having the government dictate where to place certain loans might not be the most profitable capital allocation.

A fall in the Indian rupee will have a direct impact on HDFC's dollar-denominated fair value. For example, a 20% fall in the rupee would lead to a 20% fall in the fair value with no change to the underlying fundamentals.

HDFC's quarterly financial reports are extremely lacking, in our opinion, making it hard to compare with other more transparent institutions and very difficult for investors to detect problems at the bank before they become serious. Read more

Strategy

Both through acquisitions and organically, HDFC seeks to expand its presence in India and be the financial institution of choice for India's leading corporations and its middle- and upper-income tiers Read more

Management

We think HDFC's management team is well-qualified and has adequate experience. History shows their commitment to good underwriting, able deposit gathering, and focus on cost control, all of which should result in decent profitability, in our opinion. Read more

Profile

With over $40 billion assets and nearly 2,000 branches, HDFC is one of India's largest non-government-owned banks. Its two segments, retail and wholesale, service India's Read more

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