The merger between HDFC Financial institution and HDFC now makes the entity the world’s fourth largest financial institution.
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The merger between India’s HDFC Financial institution and the Housing Growth Finance Company (HDFC) will improve the entity’s buyer base and supply extra alternatives for cross-selling, the non-executive director of HDFC Financial institution advised CNBC.
HDFC, India’s largest mortgage lender, merged with HDFC Financial institution, the nation’s greatest personal lender, in a $40 billion deal which took impact on July 1.
“A merger between the 2 entities has at all times made an immense rationale,” Keki Mistry mentioned, including that the transfer will enhance the financial institution’s mortgage portfolio and entice extra clients with a variety of monetary providers.
“Clients will now have the chance to obtain custom-made merchandise catering to their wants which solely banks in India may provide,” Mistry mentioned in an e-mail to CNBC. “From the Financial institution’s standpoint, it gives an enormous alternative to cross promote.”
Mortgage penetration
“One of many essential drivers of this merger is maximizing progress potential. The potential to deepen credit score markets and mortgages particularly, in India is immense,” Mistry mentioned.
HDFC Financial institution has round 83 million clients however solely 2% have a housing mortgage with HDFC. A further 5% of the financial institution’s clients have a housing mortgage from different lenders, he mentioned explaining that it means 93% of HDFC Financial institution’s clients do not need a house mortgage.
This presents a “important alternative to cross promote and a possible to faucet into the shopper base that haven’t taken a housing mortgage in any respect,” the director mentioned, including that HDFC Financial institution will now have the ability to provide mortgage providers.
Mortgage penetration in India is “extraordinarily low” and solely accounts for roughly 11% of its GDP.
That is a lot decrease than 26% in China, and between 20% to 40% in South East Asia, HDFC mentioned. Most developed markets have greater than 50% mortgage penetration, the corporate added.
“Combining HDFC’s specialization in housing finance and leveraging HDFC Financial institution’s huge distribution and buyer base will, within the long-term, assist within the deeper penetration of mortgage in India,” Mistry mentioned.
Different synergies
On the importance of the merger, Mistry mentioned: “The size of the merger is large be when it comes to whole property, whole deposits or market capitalization.”
The mixed entity is now the world’s fourth largest financial institution by market cap on the planet — behind JPMorgan Chase, Industrial and Business Financial institution of China and Financial institution of America. HDFC Financial institution is at present India’s second most valued firm by market cap after Reliance Industries.
HDFC Financial institution may also have the benefit of entry to low-cost present and time deposits, in addition to “a a lot wider distribution platform and the power to supply extra custom-made merchandise,” Mistry mentioned.
HDFC Financial institution will now have the ability to provide extra merchandise to house mortgage clients, he mentioned, explaining that somebody taking a housing mortgage will have the ability to obtain bundled gives from HDFC Financial institution — akin to a financial savings account and a mortgage to obtain giant electrical items like fridges and washing machines.
Moreover, Mistry famous that clients with a mortgage mortgage will preserve a a lot increased financial institution stability than different account holders, giving HDFC Financial institution a chance to extend its low-cost financial savings account deposits.
“The merger will probably be EPS accretive for HDFC Financial institution,” the non-executive director mentioned, implying it’s going to add to the corporate’s earnings progress.
“Over time, the synergies between HDFC Financial institution and different group corporations will solely deepen,” he mentioned including he was assured there have been no “insurmountable challenges.”
— CNBC’s Naman Tandon contributed to this report.