India’s largest mortgage lender HDFC merged with the country’s largest private lender HDFC Bank and becomes world’s 4th largest Bank

Merger between HDFC Bank of India and Housing Development Finance Corporation (HDFC) will increase the entity’s customer base and provide more opportunities for cross-selling, HDFC Bank’s non-executive director told sources.

India’s largest mortgage lender HDFC merged with the country’s largest private lender HDFC Bank in a $40 billion deal, effective July 1.

“The merger between the two entities has always made a big argument,” Keki Mistry said, adding that the move would improve the bank’s mortgage portfolio and attract more customers with a range of financial services.

“Customers will now have the opportunity to get customized products to meet their needs that only banks in India can offer,” Mistry said in an email to sources. “From the bank’s point of view, it provides a huge opportunity to cross sell.”

mortgage penetration

“One of the important drivers of this merger is to maximize the growth potential. The potential for deepening the credit market and mortgage, especially in India, is huge,” Mistry said.

HDFC Bank has around 83 million customers but only 2% have a home loan with HDFC. He added that an additional 5% of the bank’s customers have home loans from other lenders, which means 93% of HDFC Bank customers do not have home loans.

“This presents a significant opportunity to cross sell and the ability to reach out to a customer base who have not taken home loans at all,” said the director. He added that HDFC Bank would now be able to provide mortgage services.

Mortgage penetration in India is “very low” and accounts for only about 11% of its GDP.

This is much lower in China at 26% and in South East Asia between 20% and 40%, HDFC said. Mortgage penetration is over 50% in most developed markets, the company said.

“The combination of HDFC’s expertise in housing finance and leveraging HDFC Bank’s vast distribution and customer base will, over the long term, help in deeper penetration of mortgages in India,” Mistry said.

other synergy

On the significance of the merger, Mistry said, “The scale of the merger is huge in terms of total assets, total deposits or market capitalization.”

The combined entity is now the world’s fourth largest bank by market cap – after JPMorgan Chase, Industrial and Commercial Bank of China and Bank of America. HDFC Bank is currently the second most valuable company in India by market cap Reliance Industries.

HDFC Bank will benefit from access to low-cost current and fixed deposits, Mistry said, as well as “a wider distribution platform and the ability to offer more customized products”.

HDFC Bank will now be able to offer more products to home loan customers, he said, adding that a housing loan borrower will be able to avail bundled offers from HDFC Bank – such as a savings account and a loan to buy large electrical appliances. Refrigerator and washing machine.

Additionally, Mistry said customers with mortgage loans would maintain much higher bank balances than other account holders, giving HDFC Bank an opportunity to increase its low-cost savings account deposits.

“The merger will be EPS accretive for HDFC Bank,” said the non-executive director, implying that it would lead to an increase in the company’s earnings.

“Over time, the synergy between HDFC Bank and other group companies will deepen,” he said, adding that he was confident there would be no “insurmountable challenges”.

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