The merger between HDFC Financial institution and HDFC has made the entity the fourth largest financial institution on the planet.
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The merger between the Indian HDFC Financial institution and the Housing finance firm (HDFC) will enhance the entity’s buyer base and supply extra alternatives for cross-selling, HDFC Financial institution’s non-executive director informed CNBC.
HDFC, India’s largest mortgage lender, merged with HDFC Financial institution, the nation’s largest non-public lender, in a $40 billion deal efficient July 1.
“A merger between the 2 entities has all the time been an enormous rationale,” mentioned Keki Mistry, including that the transfer will enhance the financial institution’s mortgage portfolio and appeal to extra shoppers throughout a spread of monetary providers.
“Prospects now have the choice to obtain personalized merchandise to satisfy their wants that solely banks in India can present,” Mistry mentioned in an electronic mail to CNBC. “From the financial institution’s standpoint, it presents an enormous cross-sell alternative.”
Mortgage penetration
“One of many key drivers of this merger is maximizing development potential. The potential to deepen credit score markets and mortgages in India particularly is immense,” mentioned Mistry.
HDFC Financial institution has about 83 million prospects, however solely 2% have a house mortgage with HDFC. One other 5% of the financial institution’s shoppers have a house mortgage from different lenders, he mentioned, explaining that this implies 93% of HDFC Financial institution’s shoppers haven’t any dwelling mortgage.
This presents a “important cross-selling alternative and a possible to faucet into the client base that has not taken out a house mortgage in any respect,” mentioned the director, including that HDFC Financial institution can now supply mortgage providers.
Mortgage penetration in India is “extraordinarily low”, representing solely about 11% of GDP.
That’s a lot decrease than 26% in China and between 20% and 40% in Southeast Asia, HDFC mentioned. Most developed markets have mortgage penetration charges above 50%, the corporate added.
“Combining HDFC’s specialization in residential financing and leveraging HDFC Financial institution’s intensive distribution and buyer base will assist in the long-term deeper penetration of mortgages in India,” Mistry mentioned.
Different synergies
On the significance of the merger, Mistry mentioned, “The scale of the merger is large when it comes to whole belongings, whole deposits or market capitalization.”
The mixed entity is now the world’s fourth largest financial institution by market capitalization on the planet – behind JPMorgan Chase, Industrial and Business Financial institution of China and Financial institution of America. HDFC Financial institution is presently India’s second most valued firm by market capitalization dependent industries.
HDFC Financial institution may even take pleasure in entry to low-cost present and time period deposits, in addition to “a wider distribution platform and the power to supply extra personalized merchandise,” Mistry mentioned.
HDFC Financial institution will now be capable to supply extra merchandise to dwelling mortgage prospects, he mentioned, explaining that somebody who takes out a house mortgage can obtain bundled affords from HDFC Financial institution, corresponding to a financial savings account and a mortgage to buy main electrical items, corresponding to fridges and washing machines.
As well as, Mistry famous that mortgage prospects will maintain a lot greater financial institution balances than different account holders, giving HDFC Financial institution a chance to extend its low-cost financial savings accounts.
“The merger might be accretive to HDFC Financial institution’s earnings per share,” mentioned the non-executive director, implying it’s going to contribute to the corporate’s earnings development.
“Over time, the synergies between HDFC Financial institution and different group firms will solely develop,” he mentioned, including that he was assured there have been no “insurmountable challenges”.
— CNBC’s Naman Tandon contributed to this report.
