HDFC Bank-HDFC Merger: Deepak Parekh Says HDFC Has Found A Home For Itself
HDFC Bank - HDFC Ltd. set to merge. Management addresses the press.
Margin Impact
Commenting on the margin impact, Jagdishan said the bank's margin has always been between 4-4.4%. Now, the margin on a mortgage book will be lower. This will depress the margin. However, since it is a larger ticket loan for a longer tenor, the operating cost is lower, he said. Also these loans have lower credit losses.
Net of credit cost, we will be better on a apple-to-apple basis, he said.
No Proposal To Create NOFHC
The merger proposal does not plan on creating a non-operative financial holding company, said HDFC Bank chairman Atanu Chakraborty. The option has, however, been discussed.
"Seamless Dovetailing"
When asked whether HDFC Bank's management bandwidth will get taken up by the merger over the next 12-18 months, Jagdishan said that the merger process will be "seamless dovetailing" of one entity into the other.
It is just a "lift and move", said Jagdishan.
Cross-Selling Opportunity
Only 30% of HDFC Ltd have accounts with HDFC Bank, said Parekh. The organisation will engage with customers to encourage them to bank with HDFC Bank, he added.
On the other hand, HDFC Bank will be able to push mortgages through its network while also pursuing HDFC Ltd's customers to cross-sell other products of the bank.
EPS Accretive Immediately
Mistry explained that since the shares held by HDFC Ltd in HDFC Bank Ltd will be extinguished on the merger, the number of shares will come down. Hence, from an earnings per share perspective, the deal will be immediately accretive.
