Yes. Thanks for asking this question btw. Very pertinent. I am analyzing the “Operating expenses” As of FY20 end for IDFCF Bank and HDFC Bank.
| Attribute/Company | IDFC First | HDFC Bank | Ratio (HDFC/IDFCF) |
|---|---|---|---|
| Total Branches | 464 | 5430 | 11.7 |
| Total Operating Expenses (cr) | 5765 | 33036 | 5.73 |
| OE/B | 12.42 | 6.08 | 0.489 |
| Payment to Employees (cr) | 1795 | 12920 | 7.197 |
| Total Employees | 20222 | 116971 | 5.784 |
| Payment/Employee (lakhs) | 8.87 | 11.04 | 1.24 |
| Rent, taxes, Lighting (cr) | 292 | 1779 | 6.09 |
| Printing & Stationery (cr) | 64 | 448 | 7 |
| Advertising & Publicity (cr) | 139 | 100 | 0.719 |
| Depreciation on Properties (cr) | 320 | 1277 | 3.99 |
| Repair & Maintenance (cr) | 193 | 1293 | 6.69 |
| Other expenditure (cr) | 2806 | 13349 | 4.757 |
| Total AUM (cr) | 107000 | 993703 | 9.28 |
| AUM/Employee | 5.291 | 8.495 | 1.6 |
| AUM/Branch | 230.6 | 183 | 0.793 |
Some observations:
- The AUM size is ~10x more for HDFC bank. This gives a sense for HDFC first bank being 10x larger than IDFCF bank.
- IDFCF Bank has 10x lower number of branches, but only 5x lower number of employees. This means they employee 2x the number of employees per branch. This larger number of employees (compared to scale) also results in disproportionate outgo in employee expenses. This is what CEO means when he says operating expenses are front-loaded. There is significant operating leverage which might play out here.
- AUM/employee is much lower for IDFC First bank. As this number scales up, the Cost to income ratio would also go down, and this would be a key driver of operating leverage.
- It is my hypothesis that the Other expenditure part of the expense scales with number of employees. This is also validated by this note in HDFC Bank Annual Report: Includes professional fees, commission to sales agents, card and merchant acquiring expenses and system management fees.
- Other expenditure & Employee related expenses are both the largest expenses. Key monitorable for investment thesis playing out is sub-linear scaling of these with size of AUM. As management has guided for loan book starting to grow next quarter onwards, we should see this playing out next quarter onwards itself.
Raw data sources:
IDFCF bank AR for FY20
HDFC bank AR for FY20
HDFC bank website for number of employees FY20 end
Google search for IDFC first bank number of employees FY20 end
In the true spirit of collaborative investing, I request other investors to please carry out such comparisons with other banks of their choice and post the results on the thread for rest of us to consume. 
Disc: Invested. This is not a buy or sell recommendation.