India's economy may be slowing after a decade of hyper growth, but at 5% to 6% it's still expanding at a faster pace than the U.S.
And if you're a bank in India, there's the potential to tap millions of people who still don't use banks.
HDFC Bank ( HDB ) is trying to do something about it, at least for the growing numbers who can afford a bank account.
As part of an aggressive expansion program across the country, it's opened 1,000 bank branches, many in rural areas.
At last count, it boasted 2,620 branches and 10,300 ATMs in 1,450 cities with a customer base of more than 25 million. Some 500 opened in the last year alone.
Mumbai-based HDFC Bank is the second-largest non-government-controlled bank in India afterICICI Bank ( IBN ). ICICI also has operations outside India.
"ICICI is much larger than HDFC, but on the other hand HDFC is a pure-play Indian bank," said Morningstar analyst Maclovio Pina .
HDFC Bank is also more profitable than ICICI and the bigger government-controlled banks, such as State Bank of India, Pina says.
HDFC Bank's credit and funding costs are much lower, which means returns are higher.
Revenue and profits have been growing in double digits thanks in part to new deposits and new loans on everything from cars to home mortgages, credit cards and gold.
In the company's second fiscal quarter ending in September, net revenue in Indian rupees rose 22.2% while net profit jumped 30%.
In the U.S., HDFC Bank shares are traded in American depositary receipts. They've jumped 37% since June, last trading around 37.
In U.S. dollars in Q2, revenue rose 16% to $1.9 billion while profit jumped 19% to 37 cents a share.
According to a forecast from Thomson Reuters, profit in the full fiscal year ending in March will total $1.64 a share and rise 27% the next year to $2.09.
In Q2, the bank's low-cost deposit base rose 18.8% from the year-ago period. But branch-expansion costs helped push operating costs up 23%. If branch expansion is the primary driver of the bank's growth, India's economic growth is a secondary factor, says Pina.
"It means companies and individuals need more loans and more bank products," he said.
Pina compares HDFC Bank toWells Fargo ( WFC ) in the U.S. for a few reasons. They are both focused on retail banking, have a wide reach in their respective countries and good underwriting standards.
Morgan Stanley's research team in Asia-Pacific calls HDFC Bank their "preferred stock in India."
They expect earnings growth of 25% to 30% over the next two years and return on equity in excess of 20% the next five years.
"For banks, three things matter: profitability, growth and balance sheet," the analysts wrote. "HDFC Bank tops across metrics."
HDFC Bank's net interest margin -- the difference between funding costs on, say, deposits, and the money it makes on interest-earning loans and investments -- is typically above 4%, higher than its peers.
In the last quarter, net interest margin was 4.2%. ICICI's is usually 2% to 3%, Pina says.
The bank's good underwriting policies are evident in the low number of nonperforming loans, which now make up just 1% of its total loan portfolio vs. 3.5% for ICICI, Pina adds.
HDFC Bank's nonperforming loans hit a high of 2.2% in mid-2009, during the economic downturn. Pina says the bank has been "out of the woods" for more than a year.
Two-thirds of its revenue comes from net interest income. The rest is from noninterest income, mostly fees on such things as deposits and credit cards and cash-management services. Fee income, Pina points out, reduces the bank's reliance on interest-rate movements.
Its customer base has been split evenly between retail banking and wholesale or corporate banking.
However, in the last quarter, the split was 53% to 47% in favor of retail banking. Growth was stronger in that segment as consumer demand for gold, credit cards and other types of loans rose.
The firm has been gaining market share in retail loans, analysts say.
HDFC Bank was formed in 1994, an offspring of the Housing Development Finance Corp. It was one of the first private-sector banks to be approved under India's newly liberalized banking laws.
Chief Executive Aditya Puri, who previously headed Citibank Malaysia, has led the bank since its inception. He is known as a cautious banker, a stickler for keeping costs down and for his mantra of 30% profit growth.
He won't "bet the bank on anything," he told the Economic Times in India earlier this year. "If we don't understand anything, we don't enter that space."
"In category after category where the bank is a leader -- personal loans, gold loans, microfinance, two-wheelers, crop loans -- it's been the same, deliberate process," the newspaper said.
After being a late entrant in credit cards, the bank is a market leader with 36% market share, according to the Economic Times.
Morgan Stanley notes that the bank's credit card loans grew more than 40% in Q2 but still accounts for just 4% of its loan book.