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Merger of HDFC entities to increase M&A prominence among banks

April 13, 2022

Merger of HDFC entities to increase M&A prominence among banks
The proposed merger of HDFC Bank and HDFC Ltd could redefine the competitive landscape for banks, and increase the prominence of M&A among lenders seeking to close the market share gap with the merged entity, Fitch Ratings said on Tuesday. Fitch believes that the proposed merger of the HDFC entities and the recently announced acquisition of Citibank India’s consumer business by Axis Bank could urge banks to go to M&A (merger and acquisition).

“The proposed consolidation could redefine the competitive landscape for banks, and increase the prominence of M&A among banks seeking to close the market share gap with the merged HDFC Bank. It could likewise influence the evolution of the NBFI sector, especially for large entities that have nurtured banking ambitions amid tightening sector regulations,” Fitch said in a statement.
 
Large non-bank financial institutions (NBFI) could be acquisition targets, given their higher-margin products, large pools of priority sector clients and loans, and potential cross-selling opportunities.
 
“However, the regulatory attitude towards such acquisitions will be an important factor in their success,” the office said.
 
Last week, India’s most important lender HDFC Bank agreed to take over the country’s biggest mortgage lender in a USD 40 billion deal, creating a financial services titan in the biggest transaction in the country’s corporate history.
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