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 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 which took impact on July 1.
“A merger between the 2 entities has at all times made an immense rationale,” Keki Mistry stated, including that the transfer will enhance the financial institution’s mortgage portfolio and entice extra clients with a spread of monetary providers.
“Prospects will now have the chance to obtain personalized merchandise catering to their wants which solely banks in India may provide,” Mistry stated in an electronic mail to CNBC. “From the Financial institution’s perspective, it presents an enormous alternative to cross promote.”
“One of many crucial drivers of this merger is maximizing development potential. The potential to deepen credit score markets and mortgages specifically, in India is immense,” Mistry stated.
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 stated explaining that it means 93% of HDFC Financial institution’s clients don’t have a house mortgage.
This presents a “vital alternative to cross promote and a possible to faucet into the client base that haven’t taken a housing mortgage in any respect,” the director stated, including that HDFC Financial institution will now be capable to provide mortgage providers.
Mortgage penetration in India is “extraordinarily low” and solely accounts for about 11% of its GDP.
That is a lot decrease than 26% in China, and between 20% to 40% in South East Asia, HDFC stated. 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, support within the deeper penetration of mortgage in India,” Mistry stated.
On the importance of the merger, Mistry stated: “The size of the merger is large be by way of complete belongings, complete deposits or market capitalization.”
The mixed entity is now the world’s fourth largest financial institution by market cap on the earth — 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 even have the benefit of entry to low-cost present and time deposits, in addition to “a a lot wider distribution platform and the flexibility to supply extra personalized merchandise,” Mistry stated.
HDFC Financial institution will now be capable to provide extra merchandise to house mortgage clients, he stated, explaining that somebody taking a housing mortgage will be capable to obtain bundled presents from HDFC Financial institution — corresponding to a financial savings account and a mortgage to acquire massive electrical items like fridges and washing machines.
Moreover, Mistry famous that clients with a mortgage mortgage will keep a a lot greater financial institution steadiness than different account holders, giving HDFC Financial institution a chance to extend its low-cost financial savings account deposits.
“The merger can be EPS accretive for HDFC Financial institution,” the non-executive director stated, implying it would add to the corporate’s earnings development.
“Over time, the synergies between HDFC Financial institution and different group firms will solely deepen,” he stated including he was assured there have been no “insurmountable challenges.”
— CNBC’s Naman Tandon contributed to this report.