HDFC Bank Limited (ADR) (NYSE:HDB) Holds Great Competitive Advantage

September 27, 2016

Chief Investment Officer William Mann III of Motley Fool Asset Management says HDFC Bank Limited (ADR) (NYSE:HDB) is one of his firm’s largest holdings that has appreciated significantly, and it continues to be a company with significant competitive advantage.

HDFC Bank is an Indian bank in a market in which I would describe most of the Indian banking industry as being completely incompetent. They are state-run and very sclerotic.

HDFC Bank is extremely entrepreneurial, and you can tell the superior nature of the bank because they are able to get deposits from people who want to put their money in the bank and offer interest rates that are up to 200 basis points lower than any of their competitors. They are viewed as being extremely safe. People are willing to forgo yield in order to have their money in the safest bank in the country.

If you think about that type of situation, HDFC Bank could choose to cut some corners and still be the most competitive bank in their country, and yet, they are extremely disappointed. So that’s a type of situation that we look at. Ten years from when we bought it, and even 10 years from now, do we foresee its competitors coming to a point where they will be on the same footing as HDFC Bank? The answer to me is no.

william-h-mann
William Mann III