The slides show the details of the largest merger in Indian banking sector between HDFC Bank and CBoP.
The benifits and the side effects of the merger are also highlighted in the following presentation
Centurion Bank of
Incorporated in 1994
Incorporated in 1994
It was set up by the blue-blooded
Housing Development Finance
Corporation (HDFC), India's most reputed
Joint Ventures with Century Finance and
HDFCs Strategies include :
Increase market share in India
Maintain Low costs
Strong Asset quality
Disciplined Risk Management
High earnings in the low volatile range.
Bank of Punjab Merged with Centurion
Bank to form Centurion Bank of Punjab
Merger between HDFC Bank & Centurion Bank of Punjab (CBoP)
Merger Date : Feburay 25th 2008
Value of the Merger : $ 2.5 billion
HDFC Bank was one of the first private-sector banks to get off the ground when Indian
regulators began giving out new private-sector banking licences in the early 1990s.
Meanwhile, CBoP, a floundering new-generation private bank, was taken over in 2003 by
a group of investors spearheaded by Sabre Capital, a fund started by Mr Talwar, a former
Standard Chartered Bank chairman.
CBoP share holders would get one share of HDFC for 29 shares of CBoP.
Nature of the Merger
Economies of Scale
Wide Line of Products
Dominance in the competitive Banking Industry in India
The merger was important to face competition from foreign banks looking to enter the
Indian Banking front.
Both banks had a strong foothold in various sectors like SME & retail Segments and Retail
deposit franchise, vehicle financing, etc.
Benefits of the Merger
Regional strength is one of the benefits that HDFC Bank was looking for, but the merger
will also offer several others.
Organic growth with a merger that would add scale, geographical reach and
experienced staff, which are in short supply.
HDFC Bank has 23,000 employees while CBoP has about 7,500.
The deal will add 394 branches and 452 ATMs to HDFC Bank's existing 754 branches
and 1,906 ATMs
The new entity will have assets of about Rs1.5trillion, the merged entity will also have a
deposit base of around Rs1.2trillion and net advances of around Rs850bn.
Side effects of the Merger
On the day the swap ratio was announced, CBoP shares, which had run up in
anticipation, fell 14.5% to Rs48.25 per share in adjustment to the ratio.
HDFC Bank shares fell 3.5% to close at Rs1,422.70 a share, reflecting investor concerns
that CBoP's valuation was too high.
CBoP's asset quality and resource profile, though healthy, are slightly weaker than
HDFC Bank's own and could impact HDFC Bank adversely in the short term.
According to rating agency CRISIL, the benefits of an expanded branch network and
wider geographical coverage will more than offset any short-term negatives.
Other Road blocks :
Strategic Impact of the Merger
Increased presence in Metros
7th largest banl with assets woth Rs. 1097
Rise by :
Net Profit 44.6%
Interest Income 74.9%
Advances and Deposits grew by 60.4%
Gain to Shareholders