The Rise and Rise of HDFC Bank

03 Jul 2023


HDFC, which surged ahead of global majors like HSBC Holdings Plc and Citigroup Inc and left Indian peers like State Bank of India and ICICI Bank in market capitalisation, now ranks fourth largest among the world’s most valuable banks, after JPMorgan Chase & Co, Industrial and Commercial Bank of China Ltd and Bank of America Corp

The merger of HDFC Bank and its sister concern HDFC Ltd has created a new global leader with an asset base of around Rs18 lakh crore, which is in excess of $200 billion.

The combined entity has a customer base of over 120 million, branch network of over 8,300, and total employees of more than 177,000.

With a market capitalisation of about $172 billion, the merged HDFC Bank now ranks fourth largest among the world’s most valuable banks, after JPMorgan Chase & Co, Industrial and Commercial Bank of China Ltd and Bank of America Corp, according to data compiled by Bloomberg. 

JPMorgan Chase is the largest in the world at $417 billion. ICBC has a market cap of $229.10 billion while Bank of America is the third largest with a market capitalisation of $228 billion.

HDFC has surged ahead of global majors like HSBC Holdings Plc and Citigroup Inc. It also has left its Indian peers like State Bank of India and ICICI Bank far behind. SBI has a market cap of $79 billion while ICICI Bank is currently valued at $62 billion.

The new HDFC Bank will have a customer base of around 120 million, which is more than the population of Germany. 

HDFC Bank has been a consistent high performer in garnering deposits and in granting credit. The merger only widens its chances to grow deposits and loans.

Not, just this, some 70 per cent of its customers do not have accounts with the bank. 

The lender will be able to offer inhouse home loan products to its clients as only 2 per cent of them had a mortgage product from HDFC Ltd, according to a pre-merger presentation.

“The lifetime value of a customer’s relationship with that bank just enhances when you start to put a mortgage into his product offering,” said the bank’s chief executive, Sashi Jagdishan.

Parekh Bids Adieu

HDFC chairman Deepak Parekh has finally bid adieu to HDFC Ltd, following its merger with its twin HDFC Bank, forming a colossus in India’s banking sector. Parikh, who led the bank for three decades, taking it to the top of India’s banking industry, on Friday announced he would be hanging his boots after the merger.

In a letter to shareholders of the corporation, ahead of his departure, Parekh said the optimism surrounding India's resilience and its broad-based recovery, promises immense potential for housing finance in India years to come.

Both Parekh and HDFC Bank’s current CEO S Jagadishan were emphatic in their opinion that the country’s banking sector is set for exponential growth. Jadishan even said during interaction with employees that the sector is strong enough to witness the creation of a new HDFC Bank every four years.

"It is my time to hang my boots with both anticipation and hope for the future. While this will be my last communication to shareholders of HDFC, rest assured we now stride tall into a very exciting future of growth and prosperity," Parekh wrote.

"The HDFC experience is invaluable. Our history cannot be erased and our legacy will be taken forward," he added.

He also assured the shareholders that the work culture of the merged entity would be a combination of the best practices from both the companies.

"An oft-repeated question is what happens to the culture of HDFC? My answer to this is that mergers are inherently about change."

"The work culture will be an amalgamation of the best of both organisations. Culture at the workplace is always a shared responsibility. It needs daily reinforcement through the demonstration effect with the tone set at the top," Parekh wrote, reiterating that, "what remains steadfast is the underlying ethics and value systems of both entities."

“The confidence I derive is the agreed tenet of this integration -- preserving the fabric of the ‘HDFC way of working’. This has also been publicly articulated by the leadership at HDFC Bank,” he added.

Parekh, who joined HDFC one year after it was set up, always believed that trust and customer service are the most important components in a financial business. 

HDFC had cumulatively financed 0.12 million housing units in 1991and in 2016, the number rose to 5.5 million.

Although, Parekh is identified with HDFC, he has played a much wider role in India’s financial sector acting as a crisis consultant to the government on several occasions. Parekh has been the pointsman in issues ranging from the Unit Trust of India US-64 collapse in 2001 to the Satyam fraud.

Parekh emphasised the importance of change and the power of adaptability and new aspirations for growth, adding that the merger aims to ensure an unconstrained future for HDFC.

While the effective date of merger was 1 July, the allotment of shares will take place on 13 July, according to the boards of the two HDFCs. 

Once the merger takes effect, HDFC Bank will be 100 per cent owned by public shareholders, and existing shareholders of HDFC will own 41 per cent of the bank.

Every HDFC shareholder will get 42 shares of HDFC Bank for every 25 shares they hold.

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