Keki Mistry, a non-executive director of HDFC Bank, stated that the fusion of India's HDFC Bank and HDFC will be beneficial in regards to cross-selling. Mistry continued to mention that customers can now access a variety of additional products when taking out a home loan from the combined entity, and that there will be no major issues for current and potential customers when working with the new entity.
Keki Mistry, a non-executive director of HDFC Bank, stated to CNBC that the merger of India's HDFC Bank and the Housing Development Finance Corporation (HDFC) will result in a greater clientele and more possibilities to cross-sell. Valued at $40 billion, the combination of the nation's biggest private lender and largest mortgage lender took effect on July 1.
Mistry shared in an e-mail to CNBC that bringing the two entities together is highly advantageous; it will raise the bank's mortgage portfolio and draw more customers who will now have access to an array of financial services personalized to their needs. "From the Bank's point of view," he concluded, "it offers a considerable chance to cross sell."
Mistry stated that one of the primary motivations behind the merger was to maximize growth potential, specifically by deepening credit markets and mortgages. He highlighted that only 2% of HDFC Bank's 83 million customers have a housing loan from the bank, with a further 5% having a loan from other lenders. This means that 93% of HDFC's customers do not have a home loan and presents a large opportunity for cross selling. He also noted that mortgage penetration in India is quite low at 11% of GDP, much lower than in China and South East Asia where it is between 20-40%. To that end, Mistry believes that combining HDFC's housing finance expertise with HDFC Bank's large customer base can enable greater mortgage penetration in India in the long run.
Speaking of the merger, Mistry stated that its magnitude is evident when considering the total assets, deposits or market capitalization. He pointed out that due to the merger, HDFC Bank is the fourth-largest bank in the world by market cap, following JPMorgan Chase, Industrial and Commercial Bank of China, and Bank of America. HDFC Bank is now India's second most valued company by market cap, next to Reliance Industries. Additionally, the bank will now have access to low-cost current and time deposits, whereas customers will benefit from a broader product offering and more tailored products. Furthermore, people who take out a housing loan through HDFC Bank will also be able to get bundled offers, such as a savings account and loan for buying household appliances.
Furthermore, Mistry remarked that holders of a mortgage loan would maintain a significantly bigger bank balance than other account holders, presenting HDFC Bank a possibility to grow its low-cost savings account deposits. The non-executive director claimed that "the merger will be EPS accretive for HDFC Bank," indicating it will contribute to the organization's earnings success. He also added that he was certain there were no "insurmountable challenges" and that "in the long run, the synergies between HDFC Bank and other group companies will only deepen."— Naman Tandon from CNBC gave assistance for this article.
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