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India’s IDFC First Bank says merger will boost credit growth

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IDFC First bank signage is seen outside a branch in Mumbai, India, 04 July, 2023. IDFC First Bank merges with IDFC Limited. 155 shares of IDFC First Bank will be alloted for 100 shares of IDFC according to an Indian media report.

Nurphoto | Nurphoto | Getty Images

India’s IDFC First Bank expects to see robust credit growth following its recent merger, according to managing director and CEO V. Vaidyanathan. 

Last week, IDFC First Bank said its board had approved its merger with IDFC Ltd., the latest in a wave of consolidation in India’s financial sector.

This comes just days after a $40 billion mega merger between India’s largest private lender HDFC Bank  with Housing Development Finance Corporation, the country’s biggest mortgage lender.

Vaidyanathan said, as a country, India is on a “massive trajectory,” which holds immense growth potential for the merged entity in the near term. 

“We are insiders of this country and we can see for ourselves on day-to-day basis how the country is growing,” he told CNBC’s “Street Signs Asia” on Tuesday.

“For India’s credit market, let me say about a 15% credit growth would be a fair expectation in the near future. And for our bank, a 25% credit growth would be a fair expectation with stable asset quality.”

Last week, IDFC First Bank said the proposed merger would boost the bank’s standalone book value by 4.9% compared with its financials as of March 31. It also said it aims to increase its balance sheet by 20% to 25% per year in the near to medium term.

“The merger will lead to simplification of the corporate structure of IDFC FHCL, IDFC Limited and IDFC FIRST Bank by consolidating them into a single entity and will help streamline the regulatory compliances of the aforesaid entities,” the release added. 

Vaidyanathan noted the bank has key “strategic goals” and since the “Indian market is so large and wide and we’re still a tiny player, we think that we can grow at a good rate for a long time to come with a holding like this.”

Still, the deal is subject to approvals from India’s key regulatory authorities, including the Reserve Bank of India, Securities and Exchange Board of India and India’s stock exchanges.

Analysts have noted the recent merger will not dent IDFC First Bank’s prospects for inclusion in the MSCI standard index for August.

Inclusion in the index “would be a big deal,” said Vaidyanathan. “Whether we make it now or later in our mind, we have no doubt. We are very confident and frankly, it’d be an honor to be part of MSCI index for us,” added the CEO.

 

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