A homegrown Indian company will for the first-time rank among the world’s most valuable banks after completing a merger, marking a new challenger to the largest American and Chinese lenders occupying the coveted top spots, as reported by Bloomberg.
According to data compiled by Bloomberg, the tie-up of HDFC Bank and Housing Development Finance Corp. creates a lender that ranks fourth in equity market capitalization, behind JPMorgan Chase & Co., Industrial and Commercial Bank of China Ltd., and Bank of America Corp. The new entity is now valued at about $172 billion.
The report highlighted that the new HDFC Bank entity will have around 120 million customers, which is greater than the population of Germany.
In addition, HDFC surges ahead of banks including HSBC Holdings Plc and Citigroup Inc. The bank will also leave behind its Indian peers, State Bank of India and ICICI Bank, with market capitalizations of about $62 billion and $79 billion, respectively, as of June 22, the report noted.
"Worldwide there are very few banks, which can at this scale and size, still aspire to double over a period of four years," Suresh Ganapathy, head of financial services research for India at Macquarie Group Ltd.’s brokerage unit, said in a Bloomberg TV interview.
"The bank expects to grow at 18% to 20%, there is very good visibility in earnings growth, and they plan to double their branches in the next four years, he said. "HDFC Bank will remain a pretty formidable institution."
Regarding deposit growth, HDFC Bank has consistently outperformed its peers in garnering deposits, and the merger offers another chance to grow its deposit base by tapping the existing customers of the mortgage lender, the report said.
Furthermore, the report pointed out that HDFC Bank, which counts JPMorgan among its largest investors, is enjoying high levels of investor confidence. Its contingent convertible bonds, the riskiest type of debt that can convert to equity if a lender runs into trouble, have outperformed its global peers.
The perpetual dollar notes of HDFC Bank have handed investors a return of 3.1% so far this year, even as Bloomberg’s index of global banks’ coco bonds lost 3.5%.
The aggregate index has clawed back some of its underperformance in recent months after the turmoil caused by a controversial wipeout of Credit Suisse Group AG’s bonds eased, according to the report.
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