HDFC twins merger: We could be creating a new HDFC Bank every 4 years, says CEO Sashidhar Jagdishan

HDFC Bank Managing Director and CEO Sashidhar Jagdishan on Saturday said after the merger, the private lender is aiming to grow at a far accelerated pace, which could create ‘a new HDFC Bank every 4 years’.

In his first address after the merger of HDFC Ltd and HDFC Bank, which came into effect on July 1, CEO Sashidhar said the lender will be adding over 1,500 branches annually for some years to increase its reach to several parts of the country.

“The runway for financial services and mortgage, which are so underserved and under penetrated, is going to be very large. HDFC Bank – the combined entity – with a large and growing distribution and customer franchise, more than adequate capital, a healthy asset quality and profitability, will be best positioned to capture growth. The pace at which we aim to grow – we could be creating a new HDFC Bank every 4 years!” said Jagdishan in a letter to the employees post merger.

He added: “This is going to be a paradigm change of how we will be doing our businesses in the future - moving from sales management to relationship management. The velocity of product sales and the reduced touch points to serve the customer will be a game changer with this “power of bundling"."

He further added that the decision for the merger was spurred by the right timing, both, from an ‘economics’ and a regulatory perspective. The bank wants to harness the bond which the erstwhile HDFC Ltd created with customers through its over four decades of operations, he said.

Sashidhar said the penetration levels of the home loan product in the bank’s customer base are quite low and the merger gives an opportunity to improve it.

“The Bank with its superior digital platform and digital journeys will have the propensity to upsell to the home loan customer with a complete bouquet of the Bank’s and subsidiaries products across pay, save, borrow, invest, insure, and trade,” Sashidhar noted.

While welcoming over 4,000 employees of HDFC Ltd who have joined the bank, he assured them that their job and pay will be protected. “To ensure there is fairness, we elected an independent external expert to arrive at formulae. A committee of seniors from Ltd. and the Bank reviewed the expert’s work and did a management overlay wherever corrections were needed,” he noted.

He said the bank will be setting up a grievance committee to address any concerns. “We commit that once you settle into your roles, the committee will examine any further corrections to levels,” he said.

Here is the full text of the letter:

Dear Colleagues,

Today is a landmark day for our organisation as we mark the culmination of a very special journey – the completion of the largest merger in corporate India between HDFC Ltd.and HDFC Bank. It’s the coming together of two excellent brands, that have each distinguished themselves in their respective sectors.

I extend a very warm welcome to each one of our new colleagues, who have joined the HDFC Bank family from HDFC Ltd. We’re truly pleased to have you in our midst and I look forward to meeting you in the coming months. I also extend my heartfelt gratitude to each one of you for your hard work, dedication, and commitment during the 15 month integration process.

I have spoken many times about the advantages of this merger to all stakeholders. The decision for the merger was spurred by the right timing, both, from an ‘Economics’ and a regulatory perspective.

Our work starts from today, in realising the potential of what this merger holds for us.

The home loan product is a very emotional product for the customer and his/ her family. Typically a great bond is established between the customer and the entity providing the home loan. HDFC Ltd has excelled in nurturing trust in their customer engagement over four decades of operation. Which is why the company’s name is synonymous with a home loan. “You think of a home, you think of HDFC”. Their excellence in execution is demonstrated in the lowest ever cost to revenue of any housing finance institution globally, and a life to date credit losses of 4 basis points! Truly an amazing achievement.

It is this bond with the customer that the Bank would like to harness. The Bank is a leader in all the products, in all the customer segments with a large customer and distribution franchise. The penetration levels of the home loan product in its customer base and the extent the distribution has been leveraged, is quite low. This is an opportunity! The runway for growth is going to be large and for a long time to come.

The Bank with its superior digital platform and digital journeys will have the propensity to upsell to the home loan customer with a complete bouquet of the Bank’s and subsidiaries products across pay, save, borrow, invest, insure, and trade. The opportunity to bundle our other products like a savings account for all banking needs, a personal loan for upfront contribution to the builder, a consumer durable loan for purchase of durables for the new home, a life insurance to protect the family in any eventuality, a home insurance to protect against fire and structural damages, a credit card, an SIP along with EMI payments to create wealth, can all be bundled and orchestrated with a single click during this process. This is going to be a paradigm change of how we will be doing our businesses in the future - moving from sales management to relationship management. The velocity of product sales and the reduced touch points to serve the customer will be a game changer with this “power of bundling”.

The future is bright!

We are all blessed to be in India. India enjoys the demography advantage which no other large country enjoys. We have a young population, where almost 50% of the population is under the age of 35 years. The digital infrastructure that the government has built is unparalleled. Today, India contributes to over 40% of global digital transactions. With the per capita income at $2000 and massive penetration of mobile telephony, Internet, digital and social media, the aspiration levels of the citizens across the length and breadth of the country are on the rise. This will spur the demand for consumer goods and financial products in geometric proportions. This kind of a demography, demand for goods and services, the government’s tax and incentive policies, changing global geopolitical order and stable national government, is going to attract huge investments and make India the global production and consumption hub. India’s GDP is expected to grow from $3.5 trillion to $8 trillion in the next decade. The runway for financial services and mortgage, which are so underserved and under penetrated, is going to be very large. HDFC Bank - the combined entity - with a large and growing distribution and customer franchise, more than adequate capital, a healthy asset quality and profitability, will be best positioned to capture growth. The pace at which we aim to grow - we could be creating a new HDFC Bank every 4 years!

The sustainability of our growth is dependent on our continuous investments in people, distribution as well asemerging and advanced technologies. We will be adding 1500+ branches every year for some years to reach out to the burgeoning middle and upper segment of this vast country. The vision that we have laid out for ourselves in reimagining our technology architecture will make us a ‘Technology company’ which is into banking! You will be proud of the same when it gets unveiled over the next three years.

But the most important priorities are going to be in the way we conduct ourselves from a governance and compliance perspective, how we can enable a great working environment for our staff and how this can lead to delightful customer service. These three are going to be important elements in each one’s personal assessment, so that we reach the pinnacle of excellence in these areas.

Now let’s come to the most important element of this great brand which is getting merged into the Bank. You, the 4000+ workforce of HDFC Limited, ably supported by the HDFC sales team. The leadership team of HDFC Ltd. and I, in several forums, promised that your job and pay will be protected. We have kept that promise. To ensure there is fairness in tagging the right destination roles and levels in the bank, we elected an independent external expert to arrive at a formulae. A committee of seniors from Ltd. and the Bank reviewed the expert’s work and did a management overlay wherever corrections were needed. In any such exercise there will always be the apprehension, leading you to wonder if you have been fairly treated. Whilst we believe so, you may think otherwise. We shall set up a grievance committee to hear the concerns of anyone who wishes to air their woes. We commit that once you settle into your roles, the committee will examine any further corrections to levels.

The canvas this merged entity is going to provide is large for you, both professionally and personally. I want each one of you to enjoy the opportunity that will arise over the years. I assure you - you will not regret giving this your best. I urge you to be energised and effuse positivity around you. I wish the combined entity, the people, the best ahead of you.

I will fail in my duty if I don’t acknowledge and respect the leadership of Mr Parekh who has been a visionary to carry forward the legacy of his uncle and spawn several world class institutions; Keki, Renu, Rangan and the several leaders who created and nurtured this brand over 45+ years as well. As they handover the baton to us, we have an onerous responsibility of taking this merged entity forward.

And finally, we are blessed to have inherited a top-class platform built with passion and excellence by Mr Puri, his founding team and everyone, including you, through these 28 glorious years. As the baton moves to us, it is our responsibility to be at the forefront to grab this once in a lifetime opportunity and take it to the next orbit with the right conduct, ethos, culture and respect to customers that will make the country and stakeholders proud for generations to come.

Thank you and welcome on board. Let's enjoy a journey of togetherness.

Regards,

Sashidhar Jagdishan

Managing Director & Chief Executive Officer

HDFC Bank

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