HDFC Bank's Customer Base Surpasses Germany's Population With Merger
Having completed its merger, HDFC Bank has surged to become the fourth-largest bank worldwide in terms of equity market capitalisation with a valuation of approximately $172 billion, according to Bloomberg data. The bank is now closely trailing behind JP Morgan Chase & Co., Industrial and Commercial Bank of China Ltd., and Bank of America Corp. This remarkable achievement firmly establishes HDFC Bank as a major contender among the leading American and Chinese financial institutions, solidifying its position as a formidable player in the global banking industry.
The merger, which came into effect on 1 July, brings together a powerhouse that will cater to a staggering customer base of around 120 million individuals, surpassing the population of Germany. With a branch network expanding to over 8,300 locations and a workforce exceeding 177,000 employees, the new HDFC Bank entity commands an impressive scale that rivals global banking behemoths.
HDFC Bank's market capitalisation now surpasses prominent international banks such as HSBC Holdings Plc and Citigroup Inc. In the Indian market, it has left behind its domestic peers, the State Bank of India and ICICI Bank, which boasted market capitalisations of approximately $62 billion and $79 billion, respectively, as of 22 June.
Experts in the financial services industry recognise HDFC Bank's potential for substantial growth. Suresh Ganapathy, head of financial services research for India at Macquarie Group Ltd.'s brokerage unit, points out that very few banks worldwide have the ability to double in size over a span of four years. With a projected growth rate of 18 per cent to 20 per cent, strong visibility in earnings growth, and plans to double its branch network within the next four years, HDFC Bank is poised to remain a formidable institution.
HDFC Bank has consistently outperformed its peers in attracting deposits, and the merger presents a fresh opportunity to expand its deposit base by tapping into the existing customer pool of the mortgage lender. Currently, around 70 per cent of these customers do not hold accounts with HDFC Bank. The bank's retail head, Arvind Kapil, aims to encourage these customers to open savings accounts.
Furthermore, the merger enables HDFC Bank to offer in-house home loan products to its clients, as a mere 2 per cent of them had mortgages from HDFC Ltd. prior to the merger. Introducing mortgage products into the bank's offering enhances the lifetime value of customer relationships, as highlighted by Sashi Jagdishan, the bank's chief executive.
The bank also enjoys a high level of investor confidence, counting JPMorgan among its major investors. Even in the realm of riskiest debt, contingent convertible bonds, HDFC Bank has outperformed its global peers. The bank's perpetual dollar notes have yielded a return of 3.1 per cent so far this year, while Bloomberg's index of global banks' coco bonds has experienced a decline of 3.5 per cent. Although the global coco bond index has shown signs of recovery, HDFC Bank's performance stands out.
As HDFC Bank cements its position among the world's most valuable banks, it not only signifies a major milestone for the Indian banking industry but also poses a formidable challenge to its global counterparts. With a robust customer base, a growing branch network, and ambitious growth plans, HDFC Bank is primed to leave an indelible mark on the international banking landscape.
