Hdfc Bank Limited · NSE:HDFCBANK
Hdfc Bank — Merger or Acquisition (April 2022)
25 slides from Hdfc Bank's merger presentation, Apr 12, 2022
Slide 1: Transformational Combination of HDFC Limited with HDFC Bank
Transformational Combination of Housing Development Finance Corporation Limited (“HDFC Limited” or “HDFC”) with HDFC Bank Limited (“HDFC Bank”) April 11, 2022
Slide 2: Legal Disclaimer
Legal Disclaimer The transaction relates to securities of an Indian company and is proposed to be effected by means of a Scheme of Arrangement under Indian law. A transaction effected by means of a Scheme of Arrangement is not subject to the proxy solicitation or tender offer rules under the U.S. Se
Slide 3: Transaction overview
Transaction overview Closing Timeline and Approvals Transaction completion is subject to shareholders, creditors and regulatory approvals including from RBI, IRDAI, CCI, SEBI and Stock Exchanges Closing is expected to be achieved within ~18 months, subject to completion of regulatory approvals and o
Slide 4: Executive Summary
Executive Summary HDFC Bank’s “faster than industry” organic growth gets a fillip Mortgage business in banking model is more profitable aided by low cost of funds Access to wide and deepening distribution points of presence Enhances customer life cycle value as housing is a long tenor product HDFC B
Slide 5: Executive Summary (Cont'd)
Executive Summary (Cont’d) Regulatory convergence and harmonization has been an enabler Reserving requirements have come down from 30% to 22% enabling organic compliance with reserving Interest rates give positive spreads on reserves Resource mobilization through long tenor infrastructure and afford
Slide 6: Executive Summary (Cont'd)
Executive Summary (Cont’d) Resultant technical positives for shareholders Cancellation of HDFC Limited’s holding in HDFC Bank is day-0 accretive to book value and EPS of the Bank HDFC Bank’s shares eliminated at a price which has a holding company discount Potential value uplift from improving sum-o
Slide 7: Full Stack Financial Services Conglomerate, Potential Win Win for All Stakeholders
Full Stack Financial Services Conglomerate, Potential Win Win for All Stakeholders 1 Structural Drivers in Place for Housing Sector; Housing Demand Poised to Drive Indian Economy 2 3 Ability to Cross-sell to a Large and Growing Customer Base 4 Leveraging the Power of Distribution in Urban, Semi-urba
Slide 8: HDFC Bank and HDFC have been Growth Compounders
HDFC Bank and HDFC have been Growth Compounders FY2015 FY2018 FY2021 FY2015 FY2018 FY2021 Branches (#) 4,014 4,787 5,608 Branches (#)(5) 275 326 390 Gross Advances (INR Cr.) 3,67,888 6,64,254 11,43,309 Gross Advances (INR Cr.) 228,181 362,811 498,298 3Y CAGR (%)(2) 22% 20% 3Y CAGR (%) (2) 17% 11% Ma
Slide 9: Secured and Long Tenor Product will Lead to Robust Asset Portfolio Mix
Secured and Long Tenor Product will Lead to Robust Asset Portfolio Mix Loan Book Mix (%)(1) Note: As of Dec 31st, 2021 (unaudited) Net Advances Total Advances (INR Cr.)(1,2) 12,68,863 5,25,806 17,86,669 Pro Forma
Slide 10: Mortgage Provides Duration to Balance Sheet, Lowering Portfolio Concentration Risk
Mortgage Provides Duration to Balance Sheet, Lowering Portfolio Concentration Risk Growing Importance of Mortgages for the Bank Sticky Product, Generating Greater Customer Lifetime Value Asset Tenor Liability Tenor 30 Days ~2 Years ~1 Year ~4 Years ~20 Years (1) 3 - 5 Years Perpetual Opportunity to
Slide 11: Leveraging the Power of Branch Banking
Leveraging the Power of Branch Banking: Well Poised for Sourcing Deposits and Housing Loans Branch deposits compound with time ~90% Branches Less than 15 Years Old à At an Inflection Point Continued Branch expansion to increase reach 50+% of branches in Semi Urban and Rural areas aiding affordable h
Slide 12: Two-Pronged Growth Strategy for Deposits
Two-Pronged Growth Strategy for Deposits – Enabler for Loan Growth Enhanced branch network and improved productivity has led to ~2x increase in retail deposits per branch over FY17 – 22 Exponential Deposit Growth Incremental Branches HDFC Bank has re-inflected the rate of branch addition with FY22 a
Slide 13: Unleashing the Potential of Mortgage in Banking Model
Unleashing the Potential of Mortgage in Banking Model ~68 MM Customer Base ~2% Customers who have HDFC’s Mortgage product ~8% Customers with mortgages from other mortgage providers Significant Headroom for Mortgage Penetration Mortgage Lends Itself to Physical Distribution Conversion of mortgage fro
Slide 14: Ability to Enhance Customer Lifetime Value
Ability to Enhance Customer Lifetime Value Ability to Better Cross Sell with Full Suite of Financial Products Life Insurance General Insurance Investment Products Credit Cards Health Insurance Mortgages Savings Accounts Combined Customer Base Personal Loans
Slide 15: Combination with Deep Multi-Decade Mortgage Underwriting Expertise Across Cycles
Combination with Deep Multi-Decade Mortgage Underwriting Expertise Across Cycles 1st Retail Housing Finance Player in India 45 years of Deep Domain Expertise Best-In-Class Cost of Operations ~3,500 Product Specialists Superior Risk Management Framework Core Financial Products Superior Scale and Dist
Slide 16: Pro Forma Impact on Key Metrics
Pro Forma Impact on Key Metrics +34% +44% +8% Equity Shares Outstanding (# MM) (1) Net Worth (INR Cr.) (1) Book Value per Share (INR / Share) 554 181 229,640 115,400 414 638 Delta +42% Advances (INR Cr.)(1) 12,68,863 5,25,806 +30 bps Capital Adequacy Ratio (%)(1) 19.5% 22.4% Note: 1. Standalone (una
Slide 17: Indicative Timelines for Transaction, Approvals and Applicability of Liquidity, PSL
Indicative Timelines for Transaction, Approvals and Applicability of Liquidity, PSL Considerations SEBI/Stock Exchange RBI NHB IRDAI CCI Filing of Scheme NCLT approval, creditors approval, other approvals ROC Filing Allotment of shares Regulatory Filings & Approvals NCLT Filings & Approvals ROC Fili
Slide 18: Integration: Power of ONE
Integration: Power of ONE One Firm-One Culture-One Bank-One Brand
Slide 19: Seamless Integration
Seamless Integration Well-entrenched and aligned processes would reduce lead time typically needed to unlock synergies Processes Minimal need towards optimization of any physical infrastructure assets Infrastructure Existing arrangement on Mortgages to continue; Ability to further scale up during be
Slide 20: Mortgage in Banking Model
Mortgage in Banking Model What is the impact of mortgage product on HDFC Bank’s margins? Net Interest Margins (NIMs) should be evaluated vis-à-vis return on assets (RoA) Generally, secured products and high credit quality loans have lower margins coupled with lower cost of acquiring & servicing (for
Slide 21: Priority Sector Lending (PSL): What Changes?
Priority Sector Lending (PSL): What Changes? What does HDFC Bank currently do and how the requirements will be implemented? When do these requirements get tested? Priority Sector Lending obligations will kick-in with a lag of 12 months post the merger becoming effective For instance, if the merger i
Slide 22: CRR, SLR and Liquidity Assessment on Effective Date Day
CRR, SLR and Liquidity Assessment on Effective Date Day 0 CRR Organically met and SLR assets generate positive net returns at current yield curve What is the current regulatory regime for HDFC Ltd.? When do these requirements get tested? Is there any Day 0 impact? The requirements for Cash Reserve R
Slide 23: Glide Path / Phase-in Sought from RBI
Glide Path / Phase-in Sought from RBI HDFC Bank’s above-industry loan growth has been a meaningful contributor to India’s GDP growth over the last decade, and the glide path will enable the Bank to continue to support India’s GDP compounding What are the phase-in requests made with respect to HDFC B
Slide 24: Other Items
Other Items Would you continue with the open architecture for the third-party insurance business? Customers are the focal point of HDFC Bank’s business HDFC Bank would like the choice of products to be available to its customers As a result of this philosophy and customer centricity, HDFC Bank would
Slide 25: Other Items
Other Items What part of HDFC’s loans that you cannot continue under the banking model The regulatory regime for NBFCs enables them to offer products which are either restricted or limited under the regulatory regime for banks For instance, loan against shares with ticket size > Rs. 20 lac, loan aga