HDFC and HDFC Bank to merge effective July 1: Deepak Parekh

HDFC Chairman Dipak Parekh said on Tuesday that the merger of the Housing Development Finance Corporation with HDFC Bank is in the final stages and will become effective from July 1.

The boards of directors of HDFC and the private bank will meet on June 30 to cancel and approve the merger. Parekh said at an event to launch the HT Parekh Legacy Center that will be the last HDFC board meeting.

Accordingly, HDFC shares will be delisted from July 13 and shares of the merged entity will start trading from July 17 at the latest, Vice Chairman and CEO Kiki Mistry said, adding that “the idea is to reduce the period of time in which shares are not sold.” HDFC.”Trade Market.”

After the news, shares of HDFC and HDFC Bank both rose 2.3 percent. HDFC shares closed 1.3 percent higher at INR 2,756.60 and HDFC Bank shares closed 1.4 percent higher at Rs 1,658.25 on the New York Stock Exchange.

HDFC Bank will allocate 42 new shares for every 25 HDFC shares held by more than 740,000 shareholders.

Merger Integration

Parekh said about 90 percent of HDFC’s staff, which includes all employees except those over or close to the retirement age of 60, would be absorbed by HDFC Bank at the same salary grade.

They will continue to use our people to work on home loans and mortgages. There will be continuity. Branches and people who make loans will continue. The only thing that would change is perhaps the sanctioning authority, he said, adding that the bank needs these employees because its employees have no mortgage experience, including knowledge of the building community and real estate prices.

While HDFC staff will initially focus on mortgage loans, HDFC staff and its branches can eventually start providing other banking services as well, he said, adding that all branches will be maintained for the time being but some smaller branches may be reclassified as service centers for the bank.

He added that HDFC depositors will continue to receive the interest rate that the housing financier is committed to for the duration of their deposits.

HDFC Bank merged

“The advantage from an integration standpoint is that the two organizations don’t have similar products. The bank does everything other than housing, and HDFC only does housing. So the commonality of roles is very limited to certain functions in the company, which makes the integration process a lot simpler,” Mistry said. , adding that from the date of the merger, HDFC customers will be given the option to either switch to the bank’s benchmark rates or continue with existing HDFC rates.

The merger is expected to add INR 6 crore to HDFC Bank, bringing the combined entity’s total balance sheet size to around INR 18 crore.

“One of the biggest strengths I see in the merger with the bank is that the retail loan portfolio, which used to be 12 to 18 months, will now extend from 5 to 6 years,” Parekh said, explaining that this is because HDFC grants loans of up to 15 years, while the bank offers only short-term consumer loans at the moment.

Each branch of HDFC Bank will start selling home loans, which was not done earlier, and this will help the bank increase the size of its mortgage book, he said, adding that HDFC currently gets about 70,000-80,000 individual loan applications each month. .

Mistry added that housing demand remains strong, given India’s demographics.

Of the individual loans that have been disbursed so far, the HDFC has written off only 0.04 percent of the loans cumulatively, Mistry said. Along with the bank’s strong asset quality, the combined entity’s portfolio quality is expected to remain strong.

“Over the years, we have operated with a very low cost structure,” he said, adding that over the past two decades, our cost-to-income ratio has been in the single digits — one of the best globally.