HDFC-CBoP Merger

Merger Analysis

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HDFC Bank was incorporated in August 1994

Among the first in new generation commercial banks

Registered office in Mumbai, India

Promoted by HDFC, the parent company

IPO in India in 1995

Listed in NSE, BSE, NYSE (ADR)

Management
Managing Director Directors
Mr. Harish Engineer
Mr. Paresh Sukthankar
Mr. Keki M. Mistry
Mr. C M Vasudev
Aditya puri Managing Dr. Pandit Palande
Director
Mr. Ashim Samanta
Mrs. Renu Karnad
The Centurion Bank of Punjab (formerly Centurion Bank) was an
Indian private-sector bank.
 Retail and corporate banking services.

 A strong nationwide franchise of 403 branches and had over

5,000 employees.
 Incorporated on 30 June 1994 and received its certificate of
Commencement of Business on 20 July.
 Meregers- Bank of Punjab and kochi based lord krishna

Bank.
Management
Managing Director
Directors
Riana Talwar
Y K Modi
Kamlesh Vilkamsey
S V Venkiteswaran
K K Abdul Razak
Anju Kumar
Mr. Sailendra
Bhandari S K Jain
HDFC BANK-

Merger with Times Bank in 1999.

Centurion Bank of Punjab Limited

Merged with the Bank of Punjab(North India Based)

and Lord Krishna Bank (Kochi Based)
KEY BUSINESS PARAMETERS
HDFC BANK CBOP
Branches (Nos) 754 394
ATM (Nos) 1906 452
Customer a/c 10 2
Debit card 5 1.1
Credit cards 3.2 0.2
(figures are in million)
 HDFC-CBoP Merger
HDFC will enjoy an asset base of more than Rs. 150000
cr.
 HDFC moves to 7th position from pre-merger position
of 10th .

Largest ever merger in Indian Financial History.

Merger of Strength.
 HDFC-CBoP Merger

 Increase in HDFC’s advances and deposits by 20 %

 Expected increase in banks branch network from 754

to 1148 branches.

 The employees are highly talented and efficient

 The CBOP bank has strong leadership in market

like Punjab,Kerala etc.
Why merger-CBOP
 Premium valuation of CBOP

 Increase in CASA ratios of CBOP

 Technological benefits

 Ability to deliver world class service with rapid response time

Major issues involved
 Valuation of CBOP is critical as HDFC will have to pay 1/3 rd of values
getting from its own branches

 CBOP has workers union inherited from lord Krishna Bank where as
HDFC has worked under union free environment

 CBOP- low cost of operations and low cost of products

HDFC- more universal and sophisticated

 More positives than negatives and merger was on right track

 A friendly merger
A win-win Situation
Both companies have strong points.

The deal will increase footprint and asset holding.

Network concentration in different parts

CBOP has 170 branches in north and 140 in south region where as

HDFC has 250 in north and 150 in south

The HDFC has net margin of 4.3 % and CBOP has 3.6 %

HDFC-Times Bank

CBoP- Bank of Punjab and Lord Krishna Bank

 The CASA ratio stands at 50.9% for HDFC and 24.5% for cbop

 The capital adequacy for HDFC Bank stands at 13.8% as against 11.5%
for CBoP. 

 CBOP has good amount of foreign holding

 Advances: cbop has 15000 crores and hdfc has 71500 crores.

 Deposits: 20000 crores with cobp whereas 100000 crore with HDFC

 On financial parameters the merger would create strong banking entity

 Aftermath of Merger
Network expansion
-Network expansion in terms of state wise branches
-Dominance in areas of two-wheelers, mortgages, personal loans and
commercial vehicles.
HDFC have emerged as biggest private banks in terms of branches

Positive aspects of merger

Negative aspects of merger

 Major Benefits Accrued
 Region wise distribution reach:

Particulars CBOP HDFC

Metro 127 287
Non- metro 267 467
Metro 32% 38%
proportion
Non-metro 68% 62%
proportion
 Complementary overlay
 Higher productivity to help HDFC bank to bring down cost to income
ratio.
 Strong and experienced management team would add to international
business
 Performance improvement and benefits to accrue over medium term

CBOP
HDFC
Post merger Scenario
Retail segment would continue to be main focus
Post merger the HDFC’s stake was expected to fall by 18.7%
Issue of 26.3 million share to maintain its 23.28% stake
HDFC was to infuse 39 bn to maintain ownership
CBoP with weaker asset profile with net NPAs of 1.6% as
against 0.4% for HDFC Bank. Going forward, HDFC Bank
(combined entity) would aim to maintain its NPA profile at
these levels, which would require a charge of ~Rs2bn.
In addition, it is expected that HDFC Bank would provide
for another Rs1.5bn towards any potential NPAs.
Post merger
Parameters HDFC
snapshot
CBOP
RS Mn
Merged entity
Branch 754 394 1148
ATM 1906 452 2358
Deposits 993869 207100 1200969
CASA ratio% 51 25 46
Share capital 3541 1873 4301
Net Worth 113584 19633 225742
Total Assets 1,314,395 254039 1660959
PAT 11415 1214 12629
Benefits for both bank-

HDFC Bank : Add scale, geography and management

bandwidth.
Potential of business synergy and cultural fit

CBoP : HDFC bank would exploit its underutilized branch

network that had the requisite expertise in retail liabilities,
transaction banking and third party distribution.

The combined entity would improve productivity levels of

CBoP branches by leveraging HDFC Bank's brand name.
Benefits
The deal created an entity with an asset size of Rs
1,09,718 crore (7th largest in India), providing massive
scale economies and improved distribution with 1,148
branches and 2,358 ATMs (the largest in terms of branches
in the private sector). CBoP's strong SME relationships
complemented HDFC Bank's bias towards high-rated
corporate entities.

There were significant cross-selling opportunities in the

short-term. CBoP management had relevant experience
with larger banks (as evident in the Centurion Bank and
BoP integration earlier) managing business of the size
commensurate with HDFC Bank.
Drawbacks
The merged entity will not lend home loans given the conflict
of interest with parent HDFC and may even sell down CBoP's
home-loan book to it.

The retail portfolio of the merged entity will have more by way
of unsecured and two-wheeler loans, which have come under
pressure recently.

Different Technology plateforms.

Banc assurance related issues as per the guidelines given by

IRDA.
Growth in PAT
Post merger in FY 09 PAT rose from 15902 to 22450 rs mn
EPS also increased from 44.9 rs to 52.8 rs.
ADVANTAGE
Increased footprint and metro presence.

cost-income ratio has room for improvement.

enhanced management bandwidth to enable entry in

to international business.
both banks have senior managements of high calibre

who have worked with Citigroup at some point in their

career.
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