Hdfc: HDFC Bank merger in 4-5 weeks; bank's margin to drop, say analysts

Housing Development Finance

25/05/2023 07:26

MUMBAI, May 25 (Reuters) - 
    The HDFC-HDFC Bank Ltd  HDBK.NS   HDFC.NS  merger is just
4-5 weeks away and would result in lower net interest margin
(NIM) for the lender this year, brokerages said on Thursday, a
day after the management met analysts.
  
        The bank expects NIM – a key profitability measure – to
fall to 3.7%-3.8% in 2023-24 from 4.1% a year ago due to the
merger, Nomura analysts wrote in a report.
  
        However, lower credit costs and operating leverage will
largely offset the impact, Nomura said, citing the management,
which was represented by HDFC Bank CEO Sashidhar Jagdishan.
  
    The Reserve Bank of India had in April given selective
regulatory relief to HDFC Bank to smooth out the merger.
    HDFC Bank's management told analysts that the bank expects
to maintain post-merger return on assets of 1.9% to 2.1% for
2023-24, as compared with 2.1% in the last financial year, as
per a Macquarie note.
    Post the merger, deposit mobilisation will continue to be a
key area of focus for the bank.
    At the meet, the management reiterated its plans to add over
1,500 branches every year for the next 4-5 years, as per analyst
reports. A significant chunk of these will be in rural and
semi-urban areas.
    The bank remains confident about growing its deposits at
1.5-2x of industry growth going forward, while credit growth is
seen close to the 5-year average of 19.5%, the management told
analysts.
    HDFC Bank is expecting corporate banking to compound at a
steady pace, the management said, according to a Jefferies
report.
    The bank is looking at this space as an opportunity to
leverage corporate relationships for deposits, transaction
banking, among others, it said.

 (Reporting by Siddhi Nayak; Editing by Varun H K)
 ((Siddhi.Nayak@thomsonreuters.com; +91 22 6921 7848;))