Analysis of HDFC bank complete
Download as PPT, PDF8 likes13,542 views
HDFC Bank is one of the largest private sector banks in India that focuses on wholesale banking, retail banking, and treasury services. It has over 1,400 branches across India and provides services like loans, deposits, credit/debit cards, internet banking, and ATM access. HDFC Bank aims to become a world-class Indian bank through excellent customer service, innovative products, and maintaining high asset quality. It has a strong brand due to its reliable services and receives several awards for its performance. The bank sees opportunities in growing its rural customer base and acquiring other companies, but faces threats from new competitors and non-performing assets.
Analysis of HDFC bank complete
- 1. HDFC BANK Company Analysis On Strategic analysis on Service Sector Company HDFC Submitted to Mahesh Kumar Submitted by Triptita Ghosh
- 2. HDFC BANK INTRODUCTION HDFC Bank Limited is an Indian financial services company based in Mumbai, Maharashtra that was incorporated in August 1994. HDFC Bank is the fifth or sixth largest bank in India by assets and the second largest bank by market capitalization as of February 24, 2012. The bank was promoted by the Housing Development Finance Corporation, a premier housing finance company (set up in 1977) of India. HDFC Bank has 1,986 branches and over 5,471 ATMs, in 996 cities in India, and all branches of the bank are linked on an online real-time basis. As of 30 September 2008 the bank had total assets of Rs.1006.82 2 | P a g e BUSINESS FOCUS HDFC Bank deals with three key business segments. - Wholesale Banking Services, Retail Banking Services, Treasury. It has entered the banking consortia of over 50 corporate for providing working capital finance, trade services, corporate finance, and merchant banking. It is also providing sophisticated product structures in areas of foreign exchange and derivatives, money markets and debt trading And Equity research. Wholesale banking services Blue-chip manufacturing companies in the Indian corp to small & mid-sized corporates and agri-based businesses. For these customers, the Bank provides a wide range of commercial and transactional banking services, including working capital finance, trade services, transactional services, cash management, etc. The bank is also a leading provider of the above services to its corporate customers, mutual funds, stock exchange members and banks. Retail banking services HDFC Bank was the first bank in India to launch an International Debit Card in association with VISA (Visa Electron) and issues the MasterCard Maestro debit card as well. The Bank launched its credit card business in late 2001. By March 2009, the bank had a total card base (debit and credit cards) of over 13 million. The Bank is also one of the leading players in the “merchant acquiring” business with over 70,000 Point-of-sale (POS) terminals for debit /
- 3. HDFC BANK credit cards acceptance at merchant establishments. The Bank is positioned in various net based B2C opportunities including a wide range of internet banking services for Fixed Deposits, Loans, Bill Payments, etc. With Finest of Technology and Best of Man power in Banking Industry HDFC BANK's retail services have become by and large the best in India and since the contribution to CASAi,e total number of current and savings account of more than 50%, HDFC BANK has full potential to become Indias No.1 Private Sector Bank. Treasury Within this business, the bank has three main product areas - Foreign Exchange and Derivatives, Local Currency Money Market & Debt Securities, and Equities. These services are provided through the bank's Treasury team. To comply with statutory reserve requirements, the bank is required to hold 25% of its deposits in government securities. The Treasury business is responsible for managing the returns and market risk on this investment portfolio. Brief History The HDFC Bank was incorporated on August 1994 by the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995. The Housing Development Finance Corporation (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994. HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of over 1416 branches spread over 550 cities across India. All branches are linked on an online real– time basis. Customers in over 500 locations are also serviced through Telephone Banking. The Bank also has a network of about over 3382 networked ATMs across these cities. The promoter of the company HDFC was incepted in 1977 is India's premier housing finance company and enjoys an impeccable track record in India as well as in international markets. HDFC has developed significant expertise in retail mortgage loans to different market segments and also has a large corporate client base for its housing related credit facilities. With its experience in the financial markets, a strong market reputation, large shareholder base and unique consumer franchise, HDFC was ideally positioned to promote a bank in the Indian environment. 3 | P a g e
- 4. HDFC BANK . 4 | P a g e VISION MISSION AND OBJECTIVE HDFC BANK VISION HDFC Bank is a young and dynamic bank, with a youthful and enthusiastic team determined to accomplish the vision of becoming a world-class Indian bank. MISSION HDFC mission is to be “World Class Indian Bank", benchmarking ourselves against international standards and best practices in terms of product offerings, technology, service levels, risk management and audit & compliance. The objective is to build sound customer franchises across distinct businesses so as to be a preferred provider of banking services for target retail and wholesale customer segments, and to achieve a healthy growth in profitability, consistent with the Bank's risk appetite. They are committed to do this while ensuring the highest levels of ethical standards, professional integrity, corporate governance and regulatory compliance. OBJECTIVE The objectives of HDFC Bank cover a wide variety of topics. They focus on optimizing returns for shareholders, providing innovative products for their customers, and committing themselves to a high level of ethics Business strategy emphasizes the following : Increase the market share in India’s expanding banking and financial services industry by following a disciplined growth strategy focusing on quality and not on quantity and delivering high quality customer service. Leverage the technology platform and open scalable systems to deliver more products to more customers and to control operating costs. Maintain the current high standards for asset quality through disciplined credit.
- 5. HDFC BANK SWOT ANALYSIS OF HDFC BANK Strengths HDFC bank is the second largest private banking sector in India having 2,201 branches and 7,110 ATM’s HDFC bank is located in 1,174 cities in India and has more than 800 locations to serve customers through Telephone banking The bank’s ATM card is compatible with all domestic and international Visa/Master card, Visa Electron/ Maestro, Plus/cirus and American Express. This is one reason for HDFC cards to be the most preferred card for shopping and online transactions HDFC bank has the high degree of customer satisfaction when compared to other private banks The attrition rate in HDFC is low and it is one of the best places to work in private banking sector HDFC has lots of awards and recognition, it has received ‘Best Bank’ award from various financial rating institutions like Dun and Bradstreet, Financial express, Euro money awards for excellence, Finance Asia country awards etc HDFC has good financial advisors in terms of guiding customers towards right investments Weakness HDFC bank doesn’t have strong presence in Rural areas, where as ICICI bank its direct competitor is expanding in rural market HDFC cannot enjoy first mover advantage in rural areas. Rural people are hard core loyals in terms of banking services. HDFC lacks in aggressive marketing strategies like ICICI The bank focuses mostly on high end clients Some of the bank’s product categories lack in performance and doesn’t have reach in the market The share prices of HDFC are often fluctuating causing uncertainty for the investors 4 | P a g e
- 6. HDFC BANK Opportunities HDFC bank has better asset quality parameters over government banks, hence the profit growth is likely to increase The companies in large and SME are growing at very fast pace. HDFC has good reputation in terms of maintaining corporate salary accounts HDFC bank has improved it’s bad debts portfolio and the recovery of bad debts are high when compared to government banks HDFC has very good opportunities in abroad Greater scope for acquisitions and strategic alliances due to strong financial position Threats HDFC’s nonperforming assets (NPA) increased from 0.18 % to 0.20%. Though it is a slight variation it’s not a good sign for the financial health of the bank The non banking financial companies and new age banks are increasing in India The HDFC is not able to expand its market share as ICICI imposes major threat The government banks are trying to modernize to compete with private banks RBI has opened up to 74% for foreign banks to invest in Indian market. 5 | P a g e
- 7. 6 | P a g e HDFC BANK Marketing Mix for HDFC Product in the marketing mix of HDFC HDFC offers mainly banking services, but there are many financial products which it offers along with banking. HDFC ergo, HDFC life and HDFC home loans are some of the products. In total, the financial product portfolio of HDFC is huge. The USP of HDFC is that it designs competitive products which guarantees great response from the market and an almost unlimited longevity for business life. In terms of a banking, its product are its services, like netbanking and ATM, and being a major bank, HDFC has planned its products in proportion with the ever increasing customer’s needs, demands and expectations. Apart from offering accounts, it has carried forward its namesake of being a housing finance corporation, and offers large variety of loans for purchasing houses, construction, re- construction, buying housing land, apartments etc. with maximum loan cover of up to 85%, and maximum repayment period of up to 20 years which is a major propulsion factor for it as a bank. Being into the services business, the major support for the product lies in its distribution. Thus, after the product, the place and distribution of HDFC bank services is most important for the success of HDFC. Place in the marketing mix of HDFC The bank has an amazing 3488 branches in 2231 cities across the world. It is headquartered in Mumbai, India. HDFC bank has 11,426 ATM’s across India. Furthermore, the banks services are delivered not only through ATMs or branches, but also through an excellent netbanking service, phone banking, mobile banking and SMS banking. HDFC ensures that it has a presence so that it can concentrate on its huge commercial clientele along with being present for its retail clients. Banking is an intricate function as it includes certain confidential and security invoking processes that are to be carried on a regular basis, and they are done with minimal margin of errors, that cannot function in an unsafe environment. To make sure that all the daily confidential processes are duly met, placing these facilities becomes a very thoughtful function in itself, and HDFC has overcome these challenges by placing its operational premises at some of the most easily accessible locations across cities and towns, that are made available to its large number of account holders at strategically planned branches.
- 8. 8 | P a g e HDFC BANK Price in the marketing mix of HDFC HDFC is known to hold major market share in the banking sector of India, and this is because of reasonable yet profit invoking price structure for its services, which is justified to an extent, as every corporation has to sustain inflation and overcome market hurdles. HDFC bank has premium competitive pricing. When compared with national and PSU bank, the pricing is premium, because the minimum amount required to open an account is high. But at the same time, there are many rules, like home load interest, which are as per RBI guidelines and are competitive in nature. Thus, prices for these products are in control by the market and not by the corporation. It provides reasonable loans at maximum repayment tenure and at par interest rates to both old and new customers. Apart from regular charges, it does not charge anything for miscellaneous and associated functions such as cheque replacement, advance loan repayment, take over etc. that justifies a lot. Thus, in some places HDFC is premium priced, whereas in others it is evenly priced as per competition. Promotion in the marketing mix of HDFC From the very beginning, HDFC has planned and executed its promotional activities in a manner that has suited its service catalogue, and has maintained a 360 degree approach in planning its commercials, campaigns and marketing activities in general. These promotional activities include variety of subtle television commercials with a message, a recent and innovative method of promotion by placing signboards and milestones in the rural portions of country in local/native language, and placing “No Parking” boards outside residential and commercial buildings, that has promoted its connection with the masses and making prospective client base associated with the name i.e. HDFC. HDFC uses undifferentiated marketing techniques, it mainly focuses on introducing its financial products to everyone. Because banking in general, is a mass market product. However, for the HNI customers, well trained relationship managers, wealth managers are used to retain the HNI clients with HDFC. Thus, this service too is a promotional product for HDFC. At the end, the promotions are focused on one thing only – to spread the name of HDFC far and wide.
- 9. HDFC BANK PESTAL ANALYSIS Political Factor Government and RBI policies affect the banking sector. Sometimes looking into the political advantage of a particular party, the Government declares some measures to their benefits like waiver of short-term agricultural loans, to attract the farmer’s votes. By doing so the profits of the bank get affected. FDI move to increase the limits to 49 percent from 26 percent. The Union Budget 2009-10 extended the debt waiver scheme by six more months for farmers owing more than 2 hectare of land The Union Budget 2008-09 allowed these farmers 25% rebate on loan if they repay 75%of their overdue within stipulated period of 30th June 2009. Economic Factor Cash Reserve Ratio (CRR) reduced by 0.25% to 4.5% of net demand and time liabilities (NDTL) to potentially inject primary liquidity of Rs. 170 billion; token reduction in lending rates expected, given comfortable liquidity position and the recent revisions in deposit rates and lending rates for certain products undertaken by some Banks. Benchmark Repo rate maintained at 8.0%; Reverse Repo and Marginal Standing Facility (MSF) stand unchanged at 7.0% and 9.0%, respectively. Bank Rate also maintained at 9.0%. 9 | P a g e
- 10. HDFC BANK Following a 1% reduction in July 2012, Statutory Liquidity Ratio (SLR) kept unchanged at 23% of NDTL. The primary focus of monetary policy remains inflation control and anchoring of inflation expectations, despite increasing risks to economic growth. The Reserve Bank of India (RBI) highlighted that inflationary pressures and risks related to fiscal deficit and current account deficit constrain it from providing a stronger monetary policy response to boost economic growth. As policy measures to stimulate growth materialize, monetary policy to reinforce the positive impact of such actions while retaining a focus on managing inflation. Guidance provided that liquidity management by the RBI would ensure adequate credit flows to the productive sectors of the economy and appropriate responses to shocks brought on by external developments. 3) Social Factor HDFC announced its plans to make an entry into education sector. The group plans to focus on small towns wherein it would either set up schools or take over weak performing boarding schools. According to McKinsey Global Institute’s Bird of Gold report, the discretionary spending on education is set to increase from 5% in 2005 to 6% in 2015. HDFC will foray into this sector through a separate subsidiary. It is widely believed that many schools are planning to set up model, which is profitable and scalable, as operating under trusts makes it difficult to segregate profits. As a result, HDFC could look to adopt those schools that are open to the ‘takeover model’. HDFC already has an educational loan unit – Credila Financial Services – in which it owns 62.3% stake. Credila plans to boosts the distribution network and customer base of HDFC Bank in order to expand and also lower the cost of funds. The group’s likely entry into education sector could be beneficial in the long run. HDFC Bank ,is partnering with the city’s municipal authorities to educate people about the danger posed by plastic bags to the environment, and to offer recycle paper bags instead.The bank reinforced the Kolkata Municipal Corporation(KMC) intiated anti- plastic awarness drive by distributing recycled and eco-friendly paper bags to retailers and customers across nine markets in the city.“Encourage citizens to use environment friendly and cost effective paper bags as the best substitute. 10 | P a g e
- 11. HDFC BANK 4)Technological Factor Productivity ratio of HDFC is increasing significantly over the years. Number of employees of the group increased to 1,607 in FY2011, as compared to 797 in FY2010 and 727 in FY2009. While, profit per employee increased significantly to $491,900, as compared to $117,500 and $7,500 in FY2010 and FY2009 respectively. Administration cost per asset ratio decline to 0.30% in FY2011, as compared to 0.49 in FY2010 and 0.76 in FY2009. Similarly, cost to income ratio improved to 7.7% in FY2011 from 13.8% and 30.9% in FY2010 and FY2009 respectively. Improving productivity would likely enhance the group’s profit margin. 11 | P a g e • ATM The latest developments in terms of technology in computer and telecommunication have encouraged the bankers to change the concept of branch banking to anywhere banking. • Credit card facility has encouraged an era of cashless society. • Today MasterCard and Visa card are the two most popular cards used world over. • Smartcards or debit cards to be used for making payments. These are also called as electronic purse • Today banks are also using SMS and Internet as major tool of promotions and giving great utility to its customers. For example SMS functions through simple text messages sent from your mobile. • CORE BANKING SOLUTIONS -It is the buzzword today and every bank is trying to adopt it is the centralize banking platform through which a bank can control its entire operation the adoption of core banking solution will help bank to roll out new product and services 5) Legal Factor ATM The latest developments in terms of technology in computer and telecommunication have encouraged the bankers to change the concept of branch banking to anywhere banking. Credit card facility has encouraged an era of cashless society.
- 12. HDFC BANK Ansoff Matrix For HDFC 12 | P a g e HDFC Insurances In insurance sector HDFC’s most of the products are in star position. HDFC insurance products have high market share and high growth rate. So we have lot of opportunity for investment. HDFC Mutual Funds Mutual fund stands at cash cow. This shows that HDFC high market share and low market growth rate in mutual funds. This means we should only focus on profitable products and try to investment on those products which are low market growth rate but perform well if proper investment is theirs.
- 13. HDFC BANK BCG MATRIX The BCG matrix is a chart that had been created by Bruce Henderson for the Boston Consulting Group in 1970 to help corporations with analyzing their business units or product lines. This helps the company allocate resources and is used as an analytical tool in brand marketing, product management, strategic management, and portfolio analysis. HDFC Bank HDFC BANK stands at star position in BCG matrix. As HDFC bank have the high market growth and they also have high market share. There is a lot of growth potential for the banking industry because of increasing disposable income of customers, increasing working class, more volatility in other markets also increasing importance of savings and already discussed almost 30% of the market is still untapped. 13 | P a g e
- 14. Marketing And Branding Strategy 1. Maintaing Competitive Interest rates 2. Attractive offers on loans and mortgage 3. Best in the industry investment returns 4. Sending personalised mailers about Various Products. 5. Maintaining High level service standards for customers 14 | P a g e
- 15. HDFC BANK Positioning and Targeting strategy Positioning Strategy : HDFC Bank has positioned itself as a bank which gives higher standard of services through product innovation for the diverse need of individual & corporate clients. So they want to highlight following points in their positioning segment: -Customer centric -Service oriented -Product innovation Targeting Strategy Markets that HDFC targets Corporate banking market: this segments targets industries and their financial requirements. Capital Market: this segment target long term needs of indivisuals as well of industries. Retail banking market : this segment is for retail investors & provide them short term financial credit for their personal, house hold needs. 15 | P a g e
- 16. HDFC BANK Segmentation strategy Demographics variables Location -Metros & Rural areas Occupation Business person * High income & Low Income group Salaried class (both govt. & private) * High income & Low Income group Age Adults Minor Exclude ones- senior citizens Psychographic variables Lifestyle People who believes in modern banking with higher set of service i. e. internet banking (incontact, mobile refill, travel currency card etc.) Insurance class Security class – high rated securities City attributes (regards to price) Different levels Emerging levels 16 | P a g e
- 17. HDFC BANK Macro and Micro Environmental Factors A look at the Macro Environment factors on HDFC will help us analyzing the opportunities and threats an organization faces in this sector and what it could do it build on its strength to mitigates its weak and move from where it is now, to where it wants to go. 17 | P a g e
- 18. HDFC BANK CONCLUSION Banking is also now being regarded as a versatile financial planning tool. Research indicates that Indians have four basic financial needs during their life asset accumulation (such as buying a house or car), protecting their family, securing their children’s education, and provision for their retirement. India being a country having a huge population of around one billion people with only 32% of the banking population in India possessing banking the country has a vast potential, which has been left untapped till now. With this prospect HDFC is continuously working in this direction, but there are several competitors already in the market with the similar strategy. This project concludes that with the changing economical and political scenario bank sector faces many ups and downs but in order to maintain the position HDFC needs to follow some differentiating strategy. Because it has a very fine line of difference with its competitor ICICI and can outshine HDFC. The project has given the clear cut vision as to how to differentiate its strategy from other competitors an how to use the strength and convert the weakness of others as an opportunity. 18 | P a g e
- 19. HDFC BANK CONCLUSION Banking is also now being regarded as a versatile financial planning tool. Research indicates that Indians have four basic financial needs during their life asset accumulation (such as buying a house or car), protecting their family, securing their children’s education, and provision for their retirement. India being a country having a huge population of around one billion people with only 32% of the banking population in India possessing banking the country has a vast potential, which has been left untapped till now. With this prospect HDFC is continuously working in this direction, but there are several competitors already in the market with the similar strategy. This project concludes that with the changing economical and political scenario bank sector faces many ups and downs but in order to maintain the position HDFC needs to follow some differentiating strategy. Because it has a very fine line of difference with its competitor ICICI and can outshine HDFC. The project has given the clear cut vision as to how to differentiate its strategy from other competitors an how to use the strength and convert the weakness of others as an opportunity. 19 | P a g e