Just 4-5 weeks away, the HDFC-HDFC Bank Ltd merger will result in a lower net interest margin (NIM) for the institution this year, brokerages said on Thursday, the day after management met with analysts. According to a study by Nomura analysts, the bank forecasts NIM, a crucial profitability metric, to decline as a result of the merger from 4.1% a year ago to 3.7%-3.8% in 2023–2024.
Nomura quoted the management, which was represented by HDFC Bank CEO Sashidhar Jagdishan, as saying that decreased loan costs and operating leverage will largely offset the impact. To facilitate the merger, the Reserve Bank of India granted HDFC Bank some regulatory relief in April.
According to a Macquarie study, HDFC Bank plans to maintain a post-merger return on assets of 1.9% to 2.1% for 2023–24, down from 2.1% in the previous fiscal year. After the merger, deposit mobilization will remain a top priority for the bank.
During the meeting, the management reaffirmed its intention to open over 1,500 branches over the course of the following four to five years. These will be concentrated largely in rural and semi-urban areas. According to the management’s comments to analysts, the bank is still convinced that its deposits will increase at a rate that is 1.5–2 times that of the sector moving forward, while credit growth will be close to the 19.5% 5-year average.
According to the management, HDFC Bank anticipates consistent growth in corporate banking, according to a Jefferies study. According to the bank, this is a chance to take advantage of corporate partnerships for deposits and transaction banking, among other things.
