HDFC Bk- CBoP merger to be biggest in history

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This could be the biggest domestic merger in the history of India Inc that of HDFC Bank with Centurion Bank of Punjab .

 

Boards of both banks will meet on Saturday to give their in-principle approval. Sajeet Manghat and Krupali Pandit Yadav report that this merger will create India's third largest bank.

 

If HDFC bank and Centurion bank of Punjab merge then, it will be one of the biggest mergers India Inc has ever seen.

 

The merged entity will be the third largest bank in India with a total asset size of over Rs 2 lakh crore, but still way behind its private sector rival ICICI Bank .

 

Also HDFC Bank's 700 branches will see an addition of 390 branches of Centurion, which has a stronghold in the North and South of the country

 

However there might not be good news on the asset quality front.

 

HDFC Bank, which is known for its clean balance sheet, will have to take over Rs 255 crore of centurion's Net bad loans, which could take the Net NPA ratio of the combined entity to .5% of total advances from the current 0.4% for HDFC Bank.

 

Analyst also say HDFC Bank's low cost deposit ratio will come down from the current 50% as Centurion's low cost deposit base is just at 25%.

 

Both banks seem to be comfortable on their capital adequacy ratio, which on a merged basis would be at 12%

 

And the market capitalisation of the combined entity is likely to be at Rs 65,000 to 70,000 crore. Though there may be cultural issues that both banks have to tackle post the merger, it will not be tough for both HDFC Bank and Centurion to integrated as the duo seems quite experienced on the M&A front.