Atanu Chakraborty, part-time chairman of India's largest private sector lender HDFC Bank on July 19 listed the benefits of the bank's merger with parent Housing Development Finance Corporation (HDFC) saying multiple synergies will work in favour of the merged entity to grow further.
In his message to shareholders, Chakraborty listed the benefits of merger such as increased scale, comprehensive product offering, balance sheet resilience and the ability to drive synergies. "This would enable the Bank to serve its customers in a significantly enhanced way with a bouquet of financial services," Chakraborty added.
The merger came into effect from July 1.
The entities have formed an integration committee that has been working on various streams across businesses, IT, HR, Risk Management, Operations, Compliance, etc. to make the merger seamless and effective, Chakraborty said.
"We are also putting in place the strategy to ensure that the financial conglomerate that has emerged has in place adequate systems and processes to ensure adherence to the various regulatory regimes and a governance framework for meeting group wide compliance
and risk management objectives," said Chakraborty in his message.
Post-merger, the loan book or advances of the merged entity jumped by 38.77 percent to Rs 22.21 lakh crore as against 16 lakh crore as on March 31, as per investor presentation of bank.
The merger gave HDFC Bank entry to India's booming housing loan market while for HDFC, the decision made sense on account of vanishing reglulatory arbitrage earlier available for non-banking finance companies.
A big opportunity, says CEO
In his message to shareholders, managing director and CEO Sashidhar Jagdishan too said the timing of the merger couldn’t have come at a better time.
"This was an opportunity that we truly believed in. Buying a home is a family decision and an emotional one. This emotion is transferred to the home loan service provider and helps build lifelong bonds with the customer and his family," said managing director and CEO Sashidhar Jagdishan in his message to stake holders.
Further, only two per cent of our customers source their home loans through the Bank, while five per cent do it from other institutions. This itself is a huge opportunity, said Jagdishan.
Further, the CEO higligted the opportunities to cross sell products across customers. Explaining the merger rationale, Jagdishan said HDFC Bank with its stronger digital platforms, digital journeys and physical branch network will have the ability to offer the home loan customer 'a complete bouquet of the Bank’s and subsidiaries’ products and services'.
"Savings accounts, personal loans, insurance cover, SIPs can all be bundled along with a home loan to create a compelling value proposition to the customer, that probably does not exist in the market at the scale at which this is envisaged. Going forward this is clearly going to be a game
changer," Jagdishan added.
Jagdishan further added that in line with economic growth, home buying across the country will accelerate and emerge as a key driver of India’s GDP
over the next decade, especially affordable housing. Investments in infrastructure are vital for India’s growth. A bigger balance sheet postmerger will enable HDFC Bank to take a larger exposure in infrastructure, the CEO said.
Both HDFC and HDFC Bank had annoucned the decision to merge on April 4, 2022. In fact, HDFC an HDFC Bank merger has been in news for a while. In fact, back in 2015, HDFC Chairman Deepak Parekh had said his firm could consider a merger with HDFC Bank provided circumstances are in favour.
But, the wait for the merger got longer with the parent putting the idea in backburner. Parekh had said that the merger makes sense provided there is no loss of value for shareholders. With the merger finally happening, HDFC Bank has emerged as an even bigger financial conglomerate inching closer to its bigger rival State Bank of India.
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