Standard & Poor’s Ratings Services said today that its ratings and outlook on India’s HDFC Bank Ltd. (BBB-/Stable/A-3) will not be immediately affected by the announcement of the bank’s proposed merger with India’s privately owned Centurion Bank of Punjab Ltd. (Centurion).

Despite Centurion being about one-fifth of HDFC Bank in terms of balance sheet size, the latter’s business profile is likely to be strengthened by the merger as Centurion has a good financial profile.

The banks’ boards are scheduled to meet on Feb. 28, 2008, to consider the merger and the draft scheme of amalgamation. If approved, the merger will subsequently be subject to the necessary regulatory approvals.

If the merger materializes, it is expected to strengthen HDFC Bank’s distribution network–and hence the bank’s market position–especially in the Indian states of Punjab and Kerala. This deal will add 394 branches and 452 ATMs to HDFC Bank’s existing 754 branches and 1,906 ATMs.

Likely capital infusion by a preferential offer of shares to its promoter, HDFC Ltd., will further bolster HDFC Bank’s capitalization.

Nevertheless, Standard & Poor’s will continue to closely monitor the progress of the merger and integration plan. If the deal is likely to materially weaken HDFC Bank’s credit profile, the ratings or outlook on the bank could be negatively affected.

Sourced From: CRISIL Limited

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