HDFC vaults into ranks of world’s most valuable banks

A homegrown Indian company will, for the first time, be ranked among the most valuable banks in the world after the completion of the merger, marking a new challenger to the largest US and Chinese lenders who occupy the coveted upper positions.

tie from HDFC Bank And Housing Development Finance Company. He created a bank that ranks fourth in terms of stock market capitalization, after JPMorgan Chase & Co and Industrial and Commercial Bank of China. and Bank of America Corp, according to data compiled by Bloomberg. Its value is estimated at about $172 billion.

with Potential merger effective July 1, The new HDFC Bank entity will have approximately 120 million customers. It will also increase its branch network to more than 8,300 and boast a total employee number of more than 1,77,000 employees.

In the charts below, we highlight the size of this global banking giant and examine some of the challenges ahead for its share price.

Also read: The RBI allows HDFC Bank to suspend CPs issued to date by HDFC until their maturity date

Market value

HDFC is leading ahead of banks, including HSBC Holdings Plc and Citigroup Inc. It will also leave the bank behind Central Bank of India And ICC Bankwith a market capitalization of about $62 billion and $79 billion, respectively, as of June 22.

“Across the world, there are very few banks, that can, on this size and scale, still aspire to double it over four years,” Suresh Ganapathi, head of financial services research for India at the Macquarie Group brokerage unit, told Bloomberg TV. interview. The bank expects it to grow by 18% to 20%, and there is a very good vision of profit growth, and they plan to double their branches in the next four years, he said. “HDFC Bank will continue to be a very fine institution.”

deposit growth

HDFC Bank has consistently outperformed its peers in deposit collection and the merger provides another opportunity to grow its deposit base by leveraging the mortgage lender’s existing clients. About 70% of these customers do not have accounts with the bank. Arvind Kapil, the bank’s head of retail, said last month that he plans to get them to open a savings account.

The lender will be able to offer home interior loan products to its customers since only 2% of them have an HDFC mortgage product, according to a presentation when the merger was announced.

“The lifetime value of a customer relationship with this bank only gets better when you start placing mortgages on their product offering,” Sashi Jagdishan, the bank’s chief executive, said at the time.

Also read: SEBI sees no need to give more time to the MFs to reorganize portfolios in the merger-related HDFC twins

Trust check

HDFC Bank, which counts JPMorgan among its largest investors, enjoys high levels of investor confidence. Its emergency convertible notes — the riskiest type of debt that can convert into equity if a lender gets into trouble — has outperformed global peers. HDFC Bank’s perpetual dollar bonds have given investors a yield of 3.1% so far this year, even as the Bloomberg Coco Bond Index of global banks has lost 3.5%.

The overall index has recovered some of its underperformance in recent months after the turmoil caused by the controversial liquidation of Credit Suisse Group AG’s bonds.

inventory performance

HDFC Bank shares Less than the NIFTY Bank index over the past year. Macquarie analyst Ganapathy believes the stock’s performance will depend on loan book growth of 18% to 20%, and a 2% return on assets.

“Management is confident of maintaining a 2% return on assets and possibly exceeding that level even post-merger and also achieving strong loan growth. If they can walk the talk, shares will be revalued,” Ganapathi said in a note.

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