India's HDFC Bank at record high post HDFC-merger, among world's top 10 banks by value

Housing Development Finance

03/07/2023 08:28

MUMBAI, July 3 (Reuters) - Shares of India's HDFC Bank
 HDBK.NS  hit an all-time high on Monday after it completed its
merger with parent Housing Development Finance Corp (HDFC)
 HDFC.NS , entering the coveted list of the world's top 10 banks
by market capitalisation.
    HDFC Bank's shares jumped 3.3% to a record high of 1,757.50
rupees, while HDFC's shares rose 3.7% to 2,927.40 rupees, their
highest since April 2022, when the merger was first announced.
    The $40-billion merger-the biggest in India's corporate
history-closed on June 30 to create a financial behemoth that
can now underwrite larger ticket loans, including those for
infrastructure.
    Since the deal was announced, the private lender's shares
have risen about 14.5%, while the housing finance company's
stock has gained over 17%, both outperforming the roughly 9%
rise in the benchmark Nifty 50 index  .NSEI  in that period.
    That gives the combined entity a market capitalisation of
around $157 billion, Reuters calculations showed, more than top
global lenders such as Morgan Stanley  MS.N  and HSBC Holdings
 HSBA.L .
    Still, Morgan Stanley believes HDFC Bank's valuation is
attractive.
    "The merger is synergistic. HDFC Bank gets access to secured
and long-tenor retail mortgage products as well as a large
customer base," the brokerage said in a note dated July 2.
    It expects the merged entity's loan growth to accelerate to
17%-18% in four quarters, from 15%-16% currently, particularly
as mortgage loan growth accelerates.
    The brokerage resumed coverage of HDFC Bank with an
'overweight' rating and a target price of 2,110 rupees per
share, implying a 26% upside to its last close.
    Sashidhar Jagdishan, managing director and CEO of HDFC Bank,
has an equally bullish target.
    "The pace at which we aim to grow, we could be creating a
new HDFC Bank every 4 years," Jagdishan told employees over the
weekend.
    The combined entity, with a large and growing distribution
and customer franchise, more than adequate capital, healthy
asset quality and profitability, will be "best positioned" to
capture growth, he said.
    Both companies have set July 13 as the "record date" to swap
HDFC's shares with HDFC Bank's stock for its shareholders.

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