HDFC Bank, the second largest private sector bank in the country, is all set to absorb Centurion Bank of Punjab (CBoP), the new generation private sector bank. This will be HDFC Bank's second acquisition after Times Bank. HDFC Bank Managing Director and Chief Executive Officer Aditya Puri said in an interview to Business Standard that the integration would be over in five-seven months. Excerpts from the interview:
What prompted the merger?
We have always been looking out for the right opportunity. We wanted to buy an entity that would give us the market share, the right people, cost efficiencies and also value for the shareholders. CBoP was the right choice and the marriage happened.
What are the synergies with CBoP?
CBoP branch network is an asset for HDFC Bank. The combined entity will have a network of 1148 branches. On the business front, they are very aggressive in the small and medium enterprises sector. This is in keeping with our strategy. They have seen a 60 per cent growth in the SME business.
As a combined entity, we will be able to capture this business better. CBoP is not present in the crdit card space, and hence, HDFC Bank will be able to offer its credit card to all the existing CBoP customers.
They are not big in the car loans and transaction banking business. HDFC Bank is not big in Canada but they have a tie up with Western Union for the remittance business. There is no overlap in business segments, hence this is an ideal marriage.
Will there be any cost efficiencies?
CBoP has been grappling with a high cost-to-revenue ratio. With HDFC Bank's scale coming into the picture, this should be sorted out. The CASA (current account and saving account) ratio should also improve at CBoP branches to be in tune with that of HDFC Bank, which will bring the cost of funds down.
Will there be any branch rationalisation?
There will be no major disruption in terms of branches as they will compliment our business and also help us in our agriculture business. The strong network (of CBoP) in the south will help us in financial inclusion.
How will the people integration work out?
We are growing at 40 per cent and at this growth rate we will need people. There will be no lay-offs. In fact, we add new people every year. The integration of the second rung officials should be smooth as there is hardly any overlap.
