InvestorQ : How does HDFC Bank plan to take on competition in the banking space?
Archita Jajjoo made post

How does HDFC Bank plan to take on competition in the banking space?

Niti Shenoi answered.
3 months ago

It has aggressive plans on the cards to take on competition in retail banking. HDFC Bank had wagered on spike in bad assets in retail banking but that did not happen due to the moratorium benefit given by the RBI. Banks could avoid retail stress, but HDFC Bank lost retail market share in the process.

Now it wants to recoup. With the economy having recovered to pre-COVID levels, HDFC Bank expects that retail NPAs will get better from these levels. HDFC Bank, despite its proactive shift to the wholesale segment, saw a spike in NPAs in last 2 quarters. It wants to arrest that trend using retail focus.

The bigger concern for HDFC Bank is that while market valuation of HDFC Bank has remained largely static, that of ICICI Bank, SBI and Kotak Bank appreciated sharply, thus narrowing the gap. Both, ICICI Bank and SBI moved aggressively to fill the gap in retail banking. That is clear in the way these stocks added market cap.

To counter this loss of market share, HDFC Bank wants to make the best of the surge in consumer or revenge spending in the post-pandemic recovery. The bid edge that HDFC Bank has is its superior asset quality with gross NPAs at just about 1.7%. It can really afford to take on higher risk on the retail space, with these kind of advantages.