HDFC Will Rise to World's Most Valuable Banks After Merger.

After a merger is
finalised, an Indian corporation HDFC will join the ranks of the world’s most
valuable banks, posing a new threat to the largest American and Chinese lenders
currently holding the top two slots.

By combining forces,
HDFC Bank Ltd. and Housing Development Finance Corp. have become the world’s
fourth-largest bank by equity market capitalization, just behind JPMorgan Chase
& Co., Industrial and Commercial Bank of China Ltd., and Bank of America
Corp. Its current market cap is over $172 billion.

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The combined HDFC Bank
will have a customer base larger than Germany’s whole population upon the
merger’s anticipated July 1 implementation. It will have more than 177,000
employees and expand its branch network to more than 8,300.

HDFC has just surpassed
other financial institutions including HSBC Holdings Plc and Citigroup Inc.
State Bank of India and ICICI Bank, two Indian competitors, have market caps of
roughly $62 billion and $79 billion as of June 22.

Suresh Ganapathy, head
of financial services research for India at Macquarie Group Ltd.’s brokerage
unit, stated in a Bloomberg TV interview that “globally there are very few
banks, which can at this scale and size, still aspire to double over a period
of four years.” He stated that during the next four years, the bank plans
to double the number of its branches while maintaining a growth rate of 18% to
20%. It’s safe to say that HDFC Bank will continue to be a major financial
power.

The merger gives HDFC
Bank, which has always been better at getting deposits than its competitors,
another chance to grow its account base by getting access to the customers of
the mortgage lender. About 70% of these kinds of clients don’t have bank
accounts. The bank’s head of marketing, Arvind Kapil, said last month that he
wants to get people to open savings accounts.

Only two percent of the
institution’s customers had a mortgage product from HDFC Ltd., therefore the
merger will allow the lender to provide its own home loan products to its
customers.

Sashi Jagdishan, the
bank’s CEO at the time, remarked that including mortgages in the bank’s product
offerings will increase the lifetime value of the customer’s connection with
the institution.

Some of the inadequate
performance of the aggregate index has been recovered in recent months as the
disruption generated by the controversial write-off of Credit Suisse Group AG’s
bonds has eased.

In comparison to the
NIFTY Bank index, HDFC Bank stock has performed poorly during the past year.
Macquarie analyst Ganapathy predicts that the stock’s success would hinge on
loan book growth of 18% to 20% and a return on assets of 2%.

Management is sure that
it will be able to keep a return on assets of at least 2% and maybe even go
above that level after the merger, as well as keep strong loan growth.

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