Don't foresee cultural issues with Kotak-ING merger: HDFC

In an interview to CNBC-TV18, Keki Mistry, Vice-chairman and CEO of HDFC shared his outlook on private sector lender Kotak Mahindra Bank's merger with ING Vysya Bank.

Below is the verbatim transcript of the interview:

Menaka: What is your reaction to this coming together of Kotak Mahindra Bank and ING Vysya Bank?Mistry: My sense is that this is a very good deal. I would like to congratulate Uday. The valuation is good, I understand it is around 2.5 times the book. So that is a great valuation. I am sure it adds a lot to Kotak’s suite of product that they offer.Menaka: One of the challenges that came up was the ability to surmount cultural differences between the way these two banks have run so far. Would you think that that would be a big stumbling block for the two banks to be able to create value out of coming together?Mistry: I don’t think so. These things normally in the initial days are a little difficult but slowly over a period of time new culture, the old culture everything sort of merges. For example when HDFC Bank and Centurion Bank merger happened seven years ago initially there may have been some issues on culture, may have been I am not sure, but today there is nothing, it is absolutely smooth. So, these things do adjust over time. I personally don’t think that should be a major issue.Menaka: You are a veteran in this space, can you give us a sense of what you think the challenges could be then facing these two banks?Mistry: Initial challenges may be fitting in a few people because obviously some people will not fit into the new structure. So, that I don’t know what the bank is going to do. I am sure in a merger as big as this you have to keep aside some amount of money or some amount of compensation that you pay to people who do not fit into the combined entity. So, that is part of the game.The other challenge I would think is in terms of asset quality issues which I don’t know anything about, whether there are any asset quality issues but something which I am sure Kotak would have looked at in a great deal of detail before they announced the merger.Menaka: At these valuations this deal seems almost too good to be true?Mistry: I would say it is good valuation. One has to understand what has gone into that valuation. It is market price oriented. I am sure there would have been some adjustments. Menaka: It seems at this point that most of the adjustments were made by ING Vysya. Would that be fair to say?Mistry: I would think so but unless and until you have some information you never now. Usually adjustments are made for tax liabilities etc. So what those adjustments are that is something which would be between Kotak and ING Vysya.