Out of curiosity, on point 2. Why is hdfc bank purchacing loans from HDFC a bad thing? My understanding is that they have a great support system from hdfc with this facility, any time loan growth is lacking just buy secured prime loans from HDFC. If anything this would be bad for HDFC not the bank as it allows the the bank to have predictable numbers while making things more volatile for HDFC . Am i missing something here?
In itself (as a practice) not at all a bad thing.
Portfolio buyout is a standard industry practice. Banks have to fulfil PSL norms. Buying a pool of highly rated securities from a reputed NBFC automatically allows them to achieve this target, if inhouse PSL loans are insufficient.
If target not met then Bank’s have to park their shortfall amount with NABARD which earns less than CASA interest payout and is a loss for the bank in terms of profitability.
This happens with HFCs as well as NBFC-MFIs especially around the 4th quarter of any FY.
To ensure that the portfolio gets serviced well and the impact of incremental defaults do not put Bank’s balance sheet in stress a well laid out incentive and security covenants are put in place.
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i’m just wondering why the article would term it a bad thing, it allows hdfc bank to choose when to lend else just lay low and put the home loans from hdfc in bad times
BTW does anyone know how much hdfc charges hdfc bank for buying out the loans?
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Hdfc bank is owned 20% by hdfc and 6% by hdfc investments which, afaik, is a fully owned subsidiary of hdfc.
In this case why do all places including hdfc’s investors presentation list hdfc’s investors presentation list their shareholding as 21%?
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Interesting thought. Even in the HDFC Investments Limited Balance Sheet HDFC Bank shares are no where mentioned as such. But they are there…They are shown as “associate of holding company” 
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RBI removes all restrictions on HDFC Bank’s new Digital initiatives.
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Just 1 day after the RBI Ban was removed, can see a lot of new Credit Cards in the MITC document.
The bank is gonna be aggressive soon
Flipkart Wholesale, Pine Lab, Best Price, Retailio.
These should help bring the lost credit card market share
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HDFC Bank Conference Call on “ Commercial & Rural Business-Digging Deeper” hosted by CLSA on 10th March, 2022
HDFC Bank Fireside chat – Virtual Financials C-Suite Seminar hosted by Morgan Stanley on 17th March, 2022
Great article
Also just as a consumer as most of my family and myself is using hdfc as there main bank.
Most credit card are getting good updates specially in limit increment still think there limit enhancement is to much wage and not very user friendly but I don’t have that many credit cards other then sbi and hdfc and both are equally wage in my opinion.
They have already launched flexipay a proper rival to all new BNPL and many new offers are also comming just by seeing there management enthusiassm.
Also in this article they are launching smartbuy vyapaar in large scale very soon in mass scale already have done a soft launch.
Let’s see as in there management i personally see as the only bank that even think that these fintech is good and they need to move fast to compete atleast in there wording we can see that.
Just by seeing and how funding can dry up and how much reserves are there in hdfc bank there is a very high chance they might aquire some fintech companys.
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Even I personally have been using Hdfc products like a smart buy for the last 2-3 years.
There is some problem like their mobile-based platform especially smart buy look very outdated as no app is there and then login problem and many more will work nice for desktop users but for a mobile user might not be that great.
I have used slice and even one card the better fintech proper credit card there service especially how they validate payment without otp might be getting adopted as we see in the new card application done by hdfc is pretty hand to use and also make EMI be more visible.
The best part as a shareholder is that their new offering to not make people spend more but to acquire more customers is their smart buy for SMEs.
Also, don’t forget any of the so-called revolutionary fintech like lazy pay, slice, etc are making any money and with changing climate in the investment world, especially in us, we might see them acquire by these banks only it has happened in the past with free charge acquired by axis bank and after that their tech stack has been one of worse ones to one of the better ones.
Also to note that most banks have not paying dividend increases even after having massive gains in profits is all due to fact that RBI has made this step to have to safeguard many lenders.
We will see these happening over time and will be helpful to see that if anyone who has seen new products then informs here.
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If we look at basic arbitrage how liquid these are you may not gain any.
But now better is to value the subsidiary valuation and how hdfc bank will gain from it.
If we see the deal the complete holding of hdfc will be transferred to hdfc bank.
So by just some new shares allotment and old share conversion i think hdfc bank will gain more.
As hdfc will not only gain hdfc books but also will gain.
- 49% hdfc amc
2)51% hdfc ergo
3)10% bandhan Bank
4)49% hdfc life
I am personally will be looking how will they value these as this is the bigger opportunity.
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Kudos to corporate governance too.
There was zero leak information of such a big merger
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How will HDFC bank gain more than HDFC , when the merger ratio is fixed?
Yes, I agree. We have seen similar news are generally speculated, leaked much before the formal declaration.
This is really appreciable, and shows high corporate governance standards.
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This merger would create challenge to private banks and home finance companies. While it is early to say exactly how much benefit HDFC/HDFC Bank would get out of the merger, I would feel that this is clearly negative for competitors of both these companies
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You may see that hdfc limited can be undervalued and when it’s holding,loan book merge with hdfc bank that tends to have a higher pb then hdfc limited.
So hdfc would gain good book and when whole revaluation is done it will gain the difference in pb value if and only if it’s pb ratio reverts back to means.
Also the discounting of subsidiary might be less in this as there synergy may be valued more.
Also we can say that how the restructuring of bonds and other things like fds,debt from other entity may now become cheaper that will make the overall structure be better( restructuring of loan may not be that as the financing cost of both are very same).
These are key points that hdfc bank can gain in medium term.
And there is only share price difference arbitrage in hdfc limited so before buying do the math have seen it directly on Excel and it mostly range less then .5% that is quite low in my opinion as have been a part in many merger atleast track in idfc,equitas etc all have more then 7%+ even after months.
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