IDFC Bank-Capital First merger: Share of retail loan to go up to 45%

The management of IDFC Bank and Capital First guided investors on Monday that the share of retail loans would be 45 per cent in total loan books of the merged entity. 

At the end of the September quarter, retail loans were just 26 per cent of the total loan books in the bank. The two announced their intention to merge to create an entity having Rs 880 billion in assets under management.

The plan is to take the retail loan share to 60 per cent by 2021, but organically, said Rajiv Lall and V Vaidyanathan in the conference call with investors. This indicates after the merger the bank would likely give up on its appetite for acquisitions. In its peer private sector lenders, retail share is 50 per cent or more for most. 

The cost to income ratio in the bank will come down as the Capital First management would increase the productivity and efficiency level through lower cost braches. 

The firms also guided that after the merger, there would be sufficient growth capital for the next 2-2.5 years. The post-merger integration would take 9-10 months. After the merger, IDFC’s (the holding company) stake would fall to 37 per cent, which the company would increase to 40 per cent in 8-9 months through open market purchases, they said.