HDFC Bank-HDFC Merger: Cost Of Funds To Fall, Cross-Selling Ability To Go Up, Says Keki Mistry
A merger between HDFC Bank Ltd. and Housing Development Finance Corp. will be positive for all stakeholders, according to Keki Mistry.
When it becomes one entity, the cost of funds will come down, Mistry, vice chairman at India's largest mortgage lender, told BloombergQuint in an interview after announcing the merger. "The bank will have access to the mortgage product which has been time-tested for so long and they will have access to the lower opex structure; and we (HDFC) will have access to their wider distribution network."
The cross-selling abilities will also go up significantly, Mistry said. "Today, 70% of our customers do not bank with HDFC Bank. In a merged entity, all will be solved."
Edited excerpts from the interview:
How do both entities benefit?
Keki Mistry: When it becomes one entity, on one side the cost of funds will come down. Bank will have access to the mortgage product which has been time tested for so long, they will have access to the lower operating expenses structure and we will have access to their wider distribution network. So net-net it is positive for all stakeholders. Cross sell abilities will go up significantly. Today, 70% of our customers do not bank with HDFC Bank. In a merged entity all will be solved.
What has changed now that had not in your previous evaluations for a merger?
Keki Mistry: There have been regulatory changes. So liquidity coverage ratio was not required earlier, now it is required. NPA harmonisation has happened. Earlier the differences which were there between banks and NBFCs that has now lowered significantly. We should be able to be compliant with whatever regulatory requirements are there for our existing books. Even if the regulator does not give us the two-three years time we have sought, we can do it. To my mind, from first year we will be EPS-accretive.
What changes for Keki Mistry once this is done?
Keki Mistry has to relax now. My wife has been upset with me for a long, long time.
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