HDFC Bank poised to complete merger by April-June quarter

On 4 April, the country’s largest housing finance company HDFC Ltd announced that it would merge with HDFC Bank in a $40 billion deal, creating a financial services behemoth. HDFC Bank recently received approval from the National Company Law Tribunal (NCLT) to convene its shareholders’ meeting to vote on the merger plan.

“The overall process of merger till final NCLT approval could take 7-8 months after the shareholders’ approval. We believe that the merger could be completed a few months ahead of schedule by one to two quarters,” HDFC Bank’s chief financial officer Srinivasan Vaidyanathan said during an earnings call on Saturday.

HDFC Bank also said that its focus remains on deposit mobilization and branch expansion. The bank added 121 branches during the quarter and 157 in the first half of FY23, and 521 branches are close to opening in the second half.

It is also looking at deposit mobilization to raise funds to repay the loans taken by HDFC after the merger. Net profit grew 20% from a year ago to ₹10,610 crore at the end of the September quarter, driven by strong growth in loan book and fee income. Net interest income grew 19%, while net interest margins stood at 4.3%.

The bank’s loan book grew 23.4% from a year ago, while deposits grew 19%. Non-interest income grew just 3% to treasury losses worth ₹250 crore in the second quarter. Fee income grew 16.7%to ₹7,850 crore.

Asset quality improved, with the gross non-performing assets ratio at 1.23% in the September quarter, compared with 1.28% in the previous quarter. Slippages or fresh addition of bad loans stood at ₹5,700 crore, recoveries or upgrades at ₹2,500 crore and write-offs at ₹3,000 crore.

Provisions improved marginally by 1.6% sequentially to ₹3,240 crore. Contingent and floating provisions at ₹11,000 crore were broadly steady from the preceding quarter.