EXECUTIVE SUMMARY. On the eve of HDFC Bank’s 2QFY2020 results (October 19, 2019), an analysis of its profitability for the last 5 years reveals that, while its ROA marginally declined as credit costs increased, it was the leveraging of operating costs which compensated to maintain the bank’s excellent profitability. It appears that the bank has been able to successfully generate higher business through re-engineering its processes, and its digital strategy has contributed to this achievement. The bank has been able to sweat its labour force and existing infrastructure to achieve higher business. The critical issue remains whether the bank can continue with this strategy of leveraging its operating cost in the future. In the current faltering economy, the bank is unlikely to increase its net interest margin and its fees to compensate for the expected higher credit costs and if it is unable to continue with its earlier strategy, shareholders should expect a decline in its profitability.
Recent Posts
Most Popular
Yes Bank Volunteers Data on Its Asset Quality; But Will Other Banks Be So...
EXECUTIVE SUMMARY. A commendable feature in Yes Bank’s 3QFY2021 results declared on January 22, 2021 was the continued level of transparency made...
RBI ‘Occasional Papers’ June 1976 – First Issue
The Reserve Bank of India released the first issue of 'Occasional Papers' in June 1976. On the editorial committee were V.V. Divatia,...
Why Did the RBI Drop Its Own Proposal Safeguarding the Independence of the Internal...
EXECUTIVE SUMMARY. On January 7, 2021 the Reserve Bank of India (RBI) issued instructions to commercial banks to safeguard the independence and...
India central bank’s latest stress tests ring alarm bells for some lenders
13 Jan, 2021
AuthorGaurav Raghuvanshi
Investor aversion and strained government finances could complicate the capital plans...
Creeping Denationalisation of India’s Banking Sector
EXECUTIVE SUMMARY. In the last 7 1/2 years private sector banks have increased their market share in overall deposits and credit in...