Competition for the eye is intense in Mumbai’s business districts. If it is not bright Bollywood posters capturing the gaze of passers-by, then it is clusters of billboards blasting the names of local and global brands into the glow of the city night.
In an attempt to break through the clutter, the managing director of India’s HDFC Bank, Aditya Puri, has launched an aggressive new campaign to make the bank’s logo commonplace in Mumbai and across the country through the bank’s 4,787 outlets.
Last year Mr Puri hired US advertising agency Leo Burnett — the company responsible for McDonald’s launch in India in the mid-1990s — to launch a TV, internet and digital display campaign to make the bank more visible.
The focus on marketing, which predates the latest campaign, has helped make HDFC Bank the sole Indian representative on this year’s BrandZ survey of the world’s top 100 brands, compiled by Kantar Millward Brown, the market research group.
The bank has been included on the list since 2015 and this year inched up three ranks to become the 60th most valuable global brand, ahead of other financial groups such as Commonwealth Bank of Australia and Bank of America, which held the positions of 68 and 77 respectively.
Analysts and marketing experts say the strong recognition of the Indian bank’s brand is connected to its focus on retail lending. However, a further test of the branding campaign lies ahead as HDFC faces tougher competition from more banks moving into the retail sector.
Over the past three years HDFC Bank has muscled through India’s worst bad debt crisis in recent memory. Its large share in retail lending is credited for helping it escape a wave of toxic corporate debt, while also making it a household name across the country.
“This has been the main reason they were able to survive over the past few years,” says Kiran Khalap, co-founder and managing director at Chlorophyll, a Mumbai-based brand consultant. “But they also leveraged the brand name of the parent company very well. That was the starting point.”
The HDFC name has been closely associated with lending to families for decades, Mr Khalap says. HDFC Bank was spun out of its parent company in 1994 and then listed on the Bombay Stock Exchange. Its early lending activity focused on corporations but over the past 10 years its loan book has become primarily concentrated on retail banking.
HDFC Bank is now the second-largest private sector Indian bank and has the largest consumer loan book of any bank in the country. It did not respond to requests for comment on its marketing and branding strategy.
The challenges in the state-owned banks will inevitably lead to market share gains for the private sector banks
Until recently the status of retail banking in India lagged behind the corporate market. Most Indian banks, particularly the ones controlled by the government, pushed fiercely into corporate lending in the wake of the global financial crisis. However many borrowers, such as large infrastructure and steel groups, have not been able to repay loans.
In response, non-performing assets have skyrocketed, with a concentration in the state-owned banks. These lenders hold about 70 per cent of total loans in the Indian banking system but they also claim 85 per cent of the bad debt, according to data from S&P Global, the credit rating agency. State-owned lender IDBI Bank said earlier this year that its non-performing asset ratio had hit about 28 per cent.
Some private sector banks, such as ICICI, the country’s largest non-state bank, have also experienced problems with bad debt. Analysts say that HDFC Bank’s long-term focus on retail has made it stand out among the current troubles.
“Private sector banks in India are in a unique sweet spot,” says Rajendra Nair, a portfolio manager at JPMorgan Asset Management, which holds a stake in HDFC Bank. “The challenges in the state-owned banks will inevitably lead to market share gains for the private sector banks.”
HDFC said in March that its gross non-performing asset as a ratio of total advances was 1.3 per cent, far below the more than 15 per cent reported at some state banks.
There are challenges on the horizon, analysts say. The poor conditions for corporate lending has forced many Indian banks to push into retail banking, says Michael Puli, an analyst at S&P Global. For example, ICICI, India’s largest private sector bank, recently launched a digital banking campaign aimed at expanding its retail business.
“Everyone is moving into retail now and trying to grab market share,” Mr Puli says. “HDFC has a head start but they are going to face stronger competition.”