Thought Leadership:HDFC Bank CEO and MD Sashidhar Jagdishan shares his views on the mega-merger

The announcement of the HDFC twins received enormous attention yesterday.

“Elephants can dance as well,” says Sashidhar Jagdishan and even the stock market reacted in favour of it.

Sashidhar Jagdishan, HDFC Bank’s CEO and MD who will also continue to be the chief executive of this mammoth merged entity said, “The proposed transaction ticks all the right boxes in terms of completion of product offerings, product leadership in home loans as with other retail assets products, distribution strength across the country and a customer base that can be leveraged to cross-sell a complete suite of financial products. It is value accretive for all the stakeholders of both the organizations, including shareholders, employees and customers.”

Sashidhar Jagdishan also stated that the merger will help increase their presence in priority sector lending. In addition to leading micro enterprises, they will also introduce affordable housing loans to this sector. He also pointed out that since the interest rate regime has reduced dramatically from a 6-7% to 3-4% that means the drag on SLR and CRR is no longer a drag. The government security yields are around 6% and the cost of funds is 3-4%, making it a positive drag.

Jagdishan also mentioned that since their mortgages are just 11% of the bank’s loan book compared to 30-40%for peer banks, they will unleash these products across all branches and touchpoints, when they get regulatory approvals. Regarding the net interest margin, he said that the banks' margin has always been between 4-4.4% and now it might be lower. However, since it is a larger ticket loan for a longer tenure, the operating cost is also low, leading to lower credit losses. Concluding that in terms of net credit cost they will be better on an apple-to-apple basis.

Lastly, he noted that all HDFC employees will be absorbed by HDFC Bank. In a nutshell, the combined strength of both entities will enable a huge successful financial entity.