Deep Dive: HDFC Bank (HDB US)

HDFC Bank is India’s largest private bank. The stock has been a tremendous compounder. Despite having always looked ‘expensive’, it has rewarded shareholders with a CAGR of 21.4% over the last 20 years (in USD). HDFC Bank is an option on India’s GDP growth and financialization.

We find that the most important factor one needs to possess to own any stock, but especially a banking business in an emerging market trading for premium to book value, is conviction. With this in mind, we’ll explain why we believe HDFC is a rock-solid banking business by deconstructing the key elements of a bank business model.

We acknowledge that a bank can be a bit of a black box, which is why it’s important for investors to have confidence in not only a bank’s business, but also its culture and management. HDFC Bank has a strong track record of navigating economic cycles through prudent risk management.