Housing Development Finance Corp. and HDFC Bank Ltd. plan to merge in a deal which will create a financial behemoth of strength across retail and wholesale lending, alongside mortgages.
The merger will create an entity with a combined balance sheet of Rs 17.87 lakh crore and a net worth of Rs 3.3 lakh crore.
Advances And Loan Book Mix
The eventual entity will have 33% of its loans in the form of mortgages and 21% in retail advances. According to an investor presentation released on Monday, 24% of its loans will come from the commercial and rural banking segments and 19% from corporate.
HDFC Ltd-HDFC Bank Investor Presentation.
Impact On Key Metrics
The combined entity will have an annualised profit after tax of Rs 42,263 crore on a pro forma basis. It will have an earnings per share of close to Rs 67, according to the presentation.
According to Keki Mistry, vice chairman of HDFC, the deal will be earnings-accretive from year one.
Better Asset-Liability Mix
The merged entity will have a better asset-liability mix since it will bring together a longer gestation asset like mortgages with HDFC Bank's large deposit base, which has a significant share of current account, savings account deposits.
Growing Importance Of Mortgages
The merger also comes at a time mortgages have become among the fastest-growing loan products in the market. It also remains the category with the lowest delinquencies.
The merger will create a financial services entity with expertise across products, which can withstand economic cycles, the management said.
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