HDFC Bank, Centurion to consider merger

HDFC Bank, the private sector banking arm of housing finance major Housing Development Finance Ltd (HDFC), is the country’s second largest private sector bank after ICICI Bank. A merger with CBoP will give the merged entity a distinct edge over the others, including some major public sector banks (PSBs).

The promoters hold about 30 per cent in HDFC Bank, while foreign institutional investors have another 34.09 per cent. In CBoP, Bank Muscat holds 14.02 per cent, Kephinance Investments has 6.13 per cent, HSBC Financial Service Middle East 4.71 per cent, Sabre Capital 3.48 per cent and Ambit Capital 3.74 per cent, among others. Once the merger with HDFC Bank is cleared, it will be one of the biggest in the banking space. HDFC Bank has nearly 750 branches and plans to open another 200 branches in future. CBoP has nearly 400 branches. The merged entity will have around 1,150-1,200 branches.

Following a successful merger, the combined entity could have a market capitalisation of about Rs 63,000 crore, based on their current market values. CBoP is currently the tenth most valued bank in India with a market cap of about Rs 10,500 crore, while HDFC Bank is the third most valued at over Rs 52,000 crore.

Meanwhile, shares of both the banks declined on the BSE. While HDFC bank fell by 4.4 per cent to Rs 1474.95 on the BSE, Centurion Bank declined by 1.1 per cent to Rs 56.40.

“CBoP is also burdened with non-performing assets (NPAs) in trade financing and huge liabilities, as a result of which the performance is on a dip,” sources said.

Adding to this, due to regulatory pressures, the merger with Lord Krishna Bank (LKB) had got delayed. The official merger has still not happened. However, a top executive from CBoP said that the operations with LKB would kick off in the first week of April.

BANKING ON MERGER

hdfc baNK cBoP

Market Cap* 52,000 10,500

Branches 750 400

Share Price 1474.95 56.40

Net Profit (Q3)* 429.3 48.27

(Rs in crore)