In their research note, ICICI Securities Research analysts Kunal Shah, Renish Bhuva and Chintan Shah said that the senior management team HDFC bank (HDFCB) shares its vision and views – 1) Why it is an opportune time to realize a merger that has deep penetration, regulatory convergence, favorable market development, pricing convergence, portfolio rebalancing, enhanced cross-sell, etc. With this, the opportunity for housing loan growth has been given. 2) What gives them confidence if the merger is approved in the proposed form and structure. 3) How the merged entity will continue to grow above the industry average as shown in the past. 4) The repatriation in ROE is anticipated to be accelerated as capital is consumed and 5) how it will accelerate its deposit engine through deeper and wider network expansion, re-energizing front-end team aggression and on deposit rates will not be external.
The housing sector has gained momentum with the launch of RERA in May last year. GST, etc. and the downcycle since FY13 has ended in FY2011 as transactions are increasing. Analysts revealed that during its strategy session for May’21, the housing segment was projected as a growth theme for the country and the bank realized that it would make a difference with its home loans with only 6% advances. Missing the opportunity.
Further, he added that since then, real estate inventory levels have fallen significantly (20% from its peak), developers’ balance sheets have strengthened (through deleveraging), affordability has improved and Tier-2/ Demand for housing is increasing in 3 cities. , Further, he highlighted that while real estate is expected to drive economic growth, HDFC Bank is not participating in the opportunity in its true sense. And hence, the merger scenario was turning out to be an ideal option to usher in the housing segment in its fullest form.
Of its 71 million HDFC Bank customers, only 2% opted for HDFC home loans, while ~5% of bank customers have availed external mortgages. Meanwhile, majority of HDFC customers, to a lesser extent around 70%, are not banking with HDFC which presents yet another addressable opportunity.
At the same time, it was also understood that there was a need to convert a mortgage from an agency product to an internal product. Regulatory convergence and market developments over time have improved the risk-reward equation.
According to analysts, HDFC Bank business heads highlighted the strengths, opportunities, initiatives and strategies of the franchisees in their respective domains. Here are the salient features of HDFC Bank merger benefits as per analysts.
1. The corporate banking strategy is to increase its share of wallet and product holdings for existing-to-bank (ETB) customers. It has re-imagined the supply chain landscape. The identified growth opportunities include – i) new-to-bank (NTB) corporate customers, ii) corporates who wish to harness the benefits of the PLI scheme, and iii) becoming the largest and most preferred bank for MNCs .
2. The commercial and rural banking segment, which is capable of accounting for 60-70% of the bank’s PSL requirement, has the potential to grow at the rate of 25-30% in FY13 in FY13, so that the outstanding balance of FY2012 To achieve the disbursement of FY 2013 equal to Rs. It will double its revenue by FY25 and can consistently deliver over 3% RoAs. The strategy is oriented towards geographical expansion, gaining market share, customer acquisition and deepening village penetration.
3. In retail banking, the bank has launched India’s first digital end-to-end car loan disbursement engine. It is looking to launch digital end-to-end solutions for NTB customers for personal loans by Q3FY23. The bank will also increase its disbursement presence for gold loans by 3 times and will introduce products across India by Q4FY23.
4. The bank differentiates in the digital/tech landscape by providing technology globally through assisted (rural) and unaided (urban) modes (7x UPI switch volume in 3 years, 3x growth in core banking transaction volume) , 4.4bn ATM switch transactions in FY22) Travel experience.
5. The Bank will launch PayZap 2.0 Mobile Commerce Payment App, which will facilitate seamless onboarding of the customer and all payment forms (UPI, Card, BNPL, Wallet, etc.) across offline and online merchant acceptance points for all spend categories. ) will accept. Other digital initiatives include the Turbo No Touch digital card program, a self-service digital platform for access and service to card payments, and SmartHub Business 2.0.
“Acquiring liability will be key and the bank will accelerate its deposit engine. The bank will not be an outlier on rates and will not have a deposit pricing strategy. Expanding the network and re-activating front-end team aggression The key to driving the liability engine forward.”
“The interaction addressed some of the queries related to the merger and provided better visibility on strategic intent and how synergy gains will more than offset any statutory drag. Maintain buy,” analysts at ICICI Securities said.
Going forward, the analysts have set a target price of Rs 1,955 on HDFC Bank.
HDFC Bank shares closed on Thursday 1385.10 each on the BSE, down 0.80%. The market valuation of the bank was 7,69,007.43 crore. It remains the third largest company in terms of market capitalization on the stock exchanges.
Taking into account the target price and the June 2 stock exchange closing price, HDFC Bank has a jump potential of over 41%.