'"Alertness and the ability to pick early signs of problems have helped," Paresh Sukthankar, executive director at HDFC Bank, told Reuters in an interview, pointing to the bank's low bad loans of 0.9 percent of its book compared with 4.2 percent expected for the industry by March.At a time when lenders across the world are battling slowing growth and rising loan defaults, HDFC Bank's conservative business model and its knack of delivering returns are proving unique, and offer a lesson for its hard-pressed competitors.''Thomson Reuters StarMine's models also paint a flattering picture of its shares, a third of which are held by foreign funds. Trading at five times its book value, HDFC Bank is the world's most expensive lender and is among 15 banks globally to trade at a premium to its intrinsic value - a measure of how much shares should be worth when considering expected growth rates over the next decade.So what is the secret sauce of a bank that has sky-rocketed from being a penny stock when it was launched in 1994 to a bellwether and which now features in Forbes Asia's 'fab 50' list of companies for its ability to weather the slowdown?HDFC Bank has built its consistent growth through selective lending, diversified exposure and focus on low-cost savings deposits, Sukthankar said. It has also shunned risky, exotic products and is picky about its borrowers."We live in a volatile world," said Sukthankar, who has worked at the bank since its inception after moving from Citigroup Inc. "We don't chase higher yields and run into higher risks."HDFC Bank is choosy about issuing credit cards, offering them mostly to existing customers to avoid delinquency, and it has steered clear of lending for two-wheeler purchases in some regions - risk-averse strategies that ICICI now emulates.The lender expects non-performing loans to remain within its five-year average of 1.3-1.5 percent.''It has largely stayed away from project finance, in contrast with several other banks that lent heavily to India's power and infrastructure projects during the pre-2008 boom period.The bank's infrastructure funding is largely limited to working capital loans to contractors of project developers, keeping exposures smaller, shorter and relatively safer.There is talk in trade circles that the country's No.3 lender may be losing money in its aggressive investment banking push. The bank insists the reality is "far from it.""We don't do businesses to lose money," said Sukthankar.'http://www.reuters.com/article/2012/11/19/us-hdfcbank-india-...----------------MDP Home Fool
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