HDFC Bk Chief on Lehman impact, interest rates, M&A

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HDFC Bk Chief on Lehman impact, interest rates, M&A

Aditya Puri talks on Lehman’s strange impact on India when public preference appeared to shift from aggressive private sector banks to staid public sector banks. Puri gets candid on what he has learnt from the crisis and whether he sees the dice loaded in favour of PSU banks and how he is countering a new aggressive State Bank of India.

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A bunch of private sector banks are rising to raise capital, now that investors are willing to give.

Q: Merger-when-tell us what is the latest?

A: Latest is the same as it always was. What we had said is that nobody is for or against the merger. But it must make sense in the sense that one plus one must equal more than two. Given the regulatory environment today, with a lower statutory liquidity ratio (SLR) and no credit reserve ration (CRR) and a better tax rate for HDFC one plus one is not even going to make two rather than two plus.

Q: A whole host of private sector banks are raising money through qualified institutional placements (QIPs)-will you be raising any money?

A: Today we are one of the best capitalised banks in the world. We have at a capital adequacy of 15.6%. Also it is likely that HDFC will convert their warrants which will take us through 17% with a tier-I of 12.6%. We do not need capital not now, not next year maybe not even year after that.

Q: When you have such good capital-would that not be a great idea to buy something and things are available cheap? It would be a great idea that you buy Citi India.

A: Buy Citi India! Firstly, Citi India is not for sale! If something was available at a reasonable price and it was accretive we would look at it. The way to look at it is that our sustainable internal growth rate on our profits is about 20%. So we use up approximately 1% of capital adequacy every year. At 12.6% if we grow about 25% not necessarily and do not say I will grow 25% now average of over the next three years then we would need capital after three years.

Normally we have been doing this. All that has happened is that the HDFC capital has come in slightly earlier so our capital raising has been delay otherwise we would have raised it next year. But that apart is nothing on the table but I am sure you have agreed by comes I will take your advice.