HDFC Bank merger to create entity twice the size of ICICI Bank: S&P
PTI, Apr 4, 2022, 4:26 PM IST
Image credit: India.com
New Delhi: HDFC Bank’s planned merger with its parent HDFC will make the bank twice the size of ICICI Bank, while bolstering market share and diversifying revenues, S&P Global Ratings said on Monday.
In the biggest merger in corporate history, India’s largest housing finance company HDFC will merge with the country’s largest private lender HDFC Bank to create a banking behemoth.
Once the deal is effective, HDFC Bank will be 100 percent owned by public shareholders, and existing shareholders of HDFC will own 41 percent of the bank, according to stock exchange filings by the firms.
S&P said the merger will likely result in significant market-share gains for HDFC Bank, given HDFC (the parent) is the largest financier of mortgages in India. It will raise HDFC Bank’s loans by 42 percent to Rs 18 lakh crore (USD 237 billion), increasing the bank’s market share to about 15 percent, from 11 percent currently.
”While HDFC Bank will remain the second-largest bank in India post-merger, it will be twice the size of ICICI Bank Ltd, the third-largest bank in the country. HDFC Bank’s larger balance sheet could enhance its wholesale lending opportunities,” it said.
State-owned SBI is the largest bank in the country.
The merger is subject to regulatory and other approvals and could take 12-18 months to complete, it said.
”HDFC Bank Ltd’s planned merger with its parent will boost the India-based bank’s market share and diversify its revenues,” S&P said in a statement.
It said HDFC Bank’s business profile will diversify after the merger and the merged entity will have one-third of its portfolio in mortgage loans, compared with a reported 11 percent now.
S&P said the combined entity’s earnings could improve over the next three to five years and the merger will provide the bank with profitable cross-selling opportunities to HDFC’s large pool of customers.
”The merged bank will benefit from economies of scale and an improved ability to raise funds at competitive rates. It can also leverage HDFC Bank’s digital capabilities and distribution network to drive operational efficiencies,” it said.
S&P expects the combined entity’s capitalization and asset quality to be broadly in line with those of HDFC Bank on a standalone basis.
About 9 percent of HDFC Ltd’s portfolio comprises loans to real estate developers, where the asset quality is weaker than for the rest of the bank’s portfolio. ”In our view, HDFC Bank should be able to absorb incremental risks from this portfolio given its adequate capital and provisioning buffers,” the US-based rating agency said.
Udayavani is now on Telegram. Click here to join our channel and stay updated with the latest news.
Karnataka expects to receive FDI worth Rs 75,000 Crores: Minister
Six held for banner prohibiting entry of BJP workers to police station
Fresh plea in SC challenges validity of sections of Places of Worship Act, 1991
Related Articles More
Adani Defence & Aerospace to buy 50 pc stake in agri drone startup General Aeronautics
BookMyShow sees rush of users post-Covid wave with highest-ever ticket bookings
GAIL says no disruption in Russian LNG supplies due to sanctions
Banks need to support growth, remain watchful of slippages: RBI report
Service charge imposed by restaurants not illegal: FHRAI
Gang abducts real estate businessman; caught within minutes after a chase
JMM to field candidate for Jharkhand RS seat, Soren to meet Sonia
‘You’ll be voting CM, not just MLA,’ Yogi tells people in Dhami’s poll campaign
Smuggled gold worth Rs 29 lakhs confiscated at MIA
Prices of fertilizers up due to pandemic, war; but govt ensured supply: PM Modi