HDFC Bank to get mortgage boost; size of merged entity may be a constraint: Macquarie Capital

He mentioned that mortgage was the one thing that was not in HDFC Bank’s portfolio and it was merely acting as a sourcing agent. However, post-merger, the bank can do mortgages on a wider basis.

He said, “The segment in the economy which was always doing very well was mortgage. Even when we saw credit growth going down to a lower level like 5-6 percent, mortgages were still growing in double-digits."

"So that’s one segment where both the government as well as the RBI are on the same page and you can see quite a secular growth that is happening and that was one thing that was not there in HDFC Bank’s portfolio. So now the benefits will come to HDFC Bank over the long-term through mortgage,” he added.

Ganapathy believes the size of the merged entity will be a constraint. He reckons that there might be a few challenges for HDFC Bank. 18 percent agriculture and 10 percent vehicle norm may be tough for the bank, he mentioned. Also, it will have to abide by the law with respect to having a stake in insurance companies. Ganapathy also pointed out that HDFC Ltd has a lower return on assets (RoA) than HDFC Bank.

Watch the video for the full interview.