This group has been designated for adults age 18 or older. Please sign in and confirm your date of birth in your profile so we can verify your eligibility. You may opt to make your date of birth private.
More on this book
Kindle Notes & Highlights
as a bank what it doesn't do matters more than what it does.
HDFC Bank does very ordinary things in ordinary ways, but that yields extraordinary results.
The key lesson from the HDFC Bank story is that freedom for professional managers, non-interference by the board and the promoter and passion for success are more important than ownership.
NIM and spread are the two key parameters that give an indication of a bank's operational efficiency. As a concept, NIM and spread are similar, but there is a subtle difference between the two. While NIM is arrived at by dividing a bank's net interest income by its average interest-earning assets, spread is the margin between the yield on assets and the cost of liabilities, or the difference between interest income and interest expense as a percentage of assets. NIM can be higher or lower than the net interest spread.
A high NIM alone cannot make a bank profitable as operating expenses and credit costs, including provisions for bad assets and write-offs, can erode a substantial portion of NIM. Banks also need to cut their operating costs and increase efficiency.
The cost-to-income ratio is a key financial measure, particularly important in valuing banks.
To get the ratio, one needs to divide the operating costs (administrative and fixed costs, such as salaries and property expenses, but not bad debts that have been written off) by the operating income. The ratio gives investors a clear view of how efficiently the company is being run—the lower it is, the more profitable the company will be.
Retail banking is a volume game. A bank needs wide distribution, a lot of branches, a plethora of products and a completely different mind-set. One needs to have many products to straddle the economy of the country.
Globally, investors give much better multiple for retail earnings than for wholesale earnings because wholesale earnings are considered risky, volatile and uncertain, while retail earnings are sticky and long term.
Today, HDFC Bank is the second-largest collector of direct tax after the SBI. In the fiscal year 2012, it collected ₹1.5 trillion. The bank earns a minuscule commission but gets one- day free money, called a float.
the only mistakes one can learn from are the ones one survives.
Buying a market share today is the easiest thing one can do but later it becomes extremely expensive.
'Frequent interaction of customers with the bank leads to a high recall and enhances the overall brand recall,'
