HDFC Bank director says Indian mega merger won't face 'insurmountable challenges'

The merger betwixt India's HDFC Bank and the Housing Development Finance Corporation (HDFC) volition summation the entity's lawsuit basal and supply much opportunities for cross-selling, the non-executive manager of HDFC Bank told CNBC. 

HDFC, India's largest owe lender, merged with HDFC Bank, the country's biggest backstage lender, successful a $40 cardinal woody which took effect connected July 1.

"A merger betwixt the 2 entities has ever made an immense rationale," Keki Mistry said, adding that the determination volition amended the bank's owe portfolio and pull much customers with a scope of fiscal services.

"Customers volition present person the accidental to person customized products catering to their needs which lone banks successful India could offer," Mistry said successful an email to CNBC. "From the Bank's constituent of view, it offers a monolithic accidental to transverse sell."

"One of the captious drivers of this merger is maximizing maturation potential. The imaginable to deepen recognition markets and mortgages successful particular, successful India is immense," Mistry said.

HDFC Bank has astir 83 cardinal customers but lone 2% person a lodging indebtedness with HDFC. An further 5% of the bank's customers person a lodging indebtedness from different lenders, helium said explaining that it means 93% of HDFC Bank's customers bash not person a location loan.

This presents a "significant accidental to transverse merchantability and a imaginable to pat into the lawsuit basal that person not taken a lodging indebtedness astatine all," the manager said, adding that HDFC Bank volition present beryllium capable to connection owe services. 

Mortgage penetration successful India is "extremely low" and lone accounts for astir 11% of its GDP.

That's overmuch little than 26% successful China, and betwixt 20% to 40% successful South East Asia, HDFC said. Most developed markets person much than 50% owe penetration, the institution added.

"Combining HDFC's specialization successful lodging concern and leveraging HDFC Bank's immense organisation and lawsuit basal will, successful the long-term, assistance successful the deeper penetration of owe successful India," Mistry said. 

On the value of the merger, Mistry said: "The standard of the merger is immense beryllium successful presumption of full assets, full deposits oregon marketplace capitalization."

The combined entity is present the world's 4th largest slope by marketplace headdress successful the satellite — down JPMorgan Chase, Industrial and Commercial Bank of China and Bank of America. HDFC Bank is presently India's 2nd astir valued institution by marketplace headdress aft Reliance Industries. 

HDFC Bank volition besides person the vantage of entree to low-cost existent and clip deposits, arsenic good arsenic "a overmuch wider organisation level and the quality to connection much customized products," Mistry said. 

HDFC Bank volition present beryllium capable to connection much products to location indebtedness customers, helium said, explaining that idiosyncratic taking a lodging indebtedness volition beryllium capable to person bundled offers from HDFC Bank — specified arsenic a savings relationship and a indebtedness to procure ample electrical goods similar refrigerators and washing machines. 

Additionally, Mistry noted that customers with a owe indebtedness volition support a overmuch higher slope equilibrium than different relationship holders, giving HDFC Bank an accidental to summation its low-cost savings relationship deposits.

"The merger volition beryllium EPS accretive for HDFC Bank," the non-executive manager said, implying it volition adhd to the company's net growth.

"Over time, the synergies betwixt HDFC Bank and different radical companies volition lone deepen," helium said adding helium was assured determination were nary "insurmountable challenges."

— CNBC's Naman Tandon contributed to this report.