Event update: HDFC Bank (Outperformer) - Update on CEO’s call
HDFC Bank’s MD&CEO Mr Aditya Puri hosted a call today to address queries around Mr Sukthankar’s exit. Mr Paresh Sukthankar resigned from HDFC Bank on Friday. He was Deputy Managing Director and has been with HDFC Bank since its inception. Investors perceive him to be the face of risk management in the bank.
Key highlights from Mr Puri’s call:
- Mr Sukthankar resigned for personal reasons. Rumours that he resigned because he was not likely to be considered for CEO’s role once Mr Puri retires are untrue. He was always being considered.
- Mr Puri reiterated that succession planning is a key focus. The official search for a new CEO shall commence 18 months before Mr Puri’s retirement in Oct 2020 as communicated earlier. Internal and external candidates will be considered. The new CEO will be in place one year before Mr Puri retires.
- HDFC Bank has a strong team with a lot of talent and depth in management. Given decentralized decision making and strong systems, 75% of Mr Puri’s transition is already baked in. Technology continues to be the bank’s biggest strength. Risk management is well organized and Mr Paresh’s exit will not weaken that process. Mr Sukthankar’s designation of DMD was specially carved out for him to thank him for his contribution to the bank. After his resignation, this post will be done away with. On a separate note, Mr Paresh is not joining competition according to Mr Deepak Parekh, Chairman of HDFC.
Our view
Given the large size of HDFC Bank’s operations and its excellent asset quality we do believe that HDFC Bank has a talented team. However in each organization there are 2-3 key leaders/anchors that drive strategy and we believe Paresh was one of them along with Mr Puri. We believe succession will remain a bit of an overhang because we do not see too many external candidates who will be able to fit into Mr Puri’s or Mr Sukthankar’s shoes. Rajeev Jain is the only strong candidate that comes to our mind and we don’t even know if he wants to move out of Bajaj Finance. Mr Amitabh Chaudhry, CEO of HDFC Std Life is another candidate but if media reports are to be believed and if he is going to AXIS, he cannot withdraw from the process at this stage in our view. All other candidates that come to our mind may not be as good for HDBK as Paresh.
HDFC Bank is a commercial banking group based in India. Co. is engaged in providing banking and financial services. Co.'s operations are organized along four segments: Treasury, which includes its investment operations; Retail Banking, which serves retail customers with deposit products, loans and other services through a branch network and other delivery channels; Wholesale Banking, which provides loans, non-fund facilities and transaction services to corporations, public sector units, government bodies, and medium scale enterprises; and Other Banking Business, which includes para banking activities such as credit cards and debit cards.
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