While US banks such as the Bank of America ( BAC , quote ) and Citigroup ( C , quote ) have relied on regulator life support to survive, India's HDFC Bank ( HDB , quote ) is flourishing through shrewd loan practices and double-digit growth.
HDFC Bank is everything Bank of America and Citigroup are not. HDFC has a profit margin of almost 30%. Bank of America has a negative profit margin. HDFC's debt-to-equity ratio of 0.80 is easy to handle. Citigroup has a debt-to-equity ratio of 3.51.
Catering only to India's top businesses and wealthier classes, HDFC Bank has a non-performing loan ratio of only 1.1%. Even more impressive is that the loan growth is over 40% annually. The depositor base has been expanding at a very healthy rate, too. This naturally leads to better financials: on a quarter-by-quarter basis, earnings are up more than 30%, sales by almost 40%.
HDFC presently trades around $31, with a mean analyst target price of $40 over the next year. The short float is virtually nonexistent at 0.35%. With the IMF forecasting 7% growth for India in 2012. HDFC Bank is an excellent vehicle for riding the wave.
HDB trades well in the U.S., but investors should also look at the First Trust ISE Chindia Index Fund ( FNI , quote ), which covers many leading Chinese and Indian stocks and devotes almost 7% of its holdings to HDFC Bank.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.