Funding remains biggest risk to merger, says HDFC Bank MD
HDFC Bank and HDFC merger, Sashidhar Jagdishan, the private lender's MD, said on Friday. HDFC Bank has been on an overdrive to accrue deposits to provide cover for the liabilities arising out of the merger that now includes the finances of the erstwhile mortgage lender. Jagdishan, who was addressing shareholders at the lender's 29th annual general meeting, also said that net interest margins for the bank will drop September quarter onwards, once the merger impact plays out.
«We believe we have a wonderful chance in terms of executing this (merger), it's not going to be easy,» said Jagdishan, who now heads one of the world's top ten lenders by market value. «As you know, the risks of the merger is the funding part of it. And we believe that this is a challenge that the entire bank, the leadership team of HDFC Bank and all the levels below are very excited about...There is no reason we will not be able to surmount the challenges.» HDFC Bank has set itself a target to mobilise '4 lakh crore of deposits to help expand loans at 18%.
Jagdishan also added that margins of the bank will see a downward trend in the future. «The bank has demonstrated that it can do business in a range-bound manner. We operate within a range of 4% to 4.4% over multiple business and interest rate cycles,» said Jagdishan.
«But with the merger and because the home loan is now going to be a significant part of the total advances book and it carries a lesser spread. The NIMs will drop, I think in Q2, which will be declared sometime in the later part of October. It will be visible as to where the impact of NIM will be.» On shareholder's remarks on the non-inclusion of Deepak Parekh in the HDFC Bank board, bank's chairman Atanu Chakraborty said, «Mr Parekh
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