In a remarkable feat, an indigenous Indian company will ascend to the upper echelons of the global banking landscape, as the tie-up of HDFC Bank and Housing Development Finance Corporation will seal the merged entity's place among the world's most valuable banks and large enough to challenge peers from US and China.

According to data provided by Bloomberg, the merger of HDFC Bank and HDFC will create a financial juggernaut that will take fourth place in stock market capitalization, behind only JPMorgan Chase, Industrial and Commercial Bank of China, and Bank of America.

With the merger likely effective July 1, the new HDFC Bank entity will have around 120 million customers - that's greater than the population of Germany. It'll also increase its branch network to over 8,300 and boast a total headcount of more than 177,000 employees.

The largest corporate transaction in Indian history, the $40 billion deal between HDFC Bank and the largest domestic mortgage lender on April 4 of last year resulted in the creation of a financial services behemoth. Apart from group insurance and asset management, the merger, which is unique in India, will affect tens of millions of clients and stockholders across the two businesses. The new bank will be valued at $172 billion.

Banks like HSBC Holdings Plc and Citigroup Inc. are overtaken by HDFC. ICICI Bank and State Bank of India, two Indian competitors with market capitalizations of $62 billion and $79 billion, respectively, as of June 22, will also be left in the bank's wake.

"Worldwide there are very few banks, which can at this scale and size, still aspire to double over a period of four years," Suresh Ganapathy, head of financial services research for India at Macquarie Group Ltd.'s brokerage unit, said in a Bloomberg TV interview. The bank expects to grow at 18% to 20%, there is very good visibility in earnings growth, and they plan to double their branches in the next four years, he said. "HDFC Bank will remain a pretty formidable institution."

In attracting deposits, HDFC Bank has consistently outperformed its competitors. The merger offers another chance for the bank to grow its deposit base by drawing on the mortgage lender's current clientele. Surprisingly, 70% of these clients do not currently have bank accounts. In order to improve the bank's relationship with these consumers, Arvind Kapil, the retail head at HDFC Bank, recently disclosed his ideas to urge people to open savings accounts.

The lender will be able to offer in-house home loan products to its clients as only 2% of them had a mortgage product from HDFC Ltd., according to a presentation when the merger was announced.

"The lifetime value of a customer's relationship with that bank just enhances when you start to put a mortgage into his product offering," Sashi Jagdishan, the bank's chief executive, said at the time.

HDFC Bank, which counts JPMorgan among its largest investors, is enjoying high levels of investor confidence. Its contingent convertible bonds - the riskiest type of debt that can convert to equity if a lender runs into trouble - have outperformed its global peers. The perpetual dollar notes of HDFC Bank handed investors a return of 3.1% so far this year, even as Bloomberg's index of global banks' coco bonds lost 3.5%.

The aggregate index has clawed back some of its underperformance in recent months after the turmoil caused by a controversial wipeout of Credit Suisse Group AG's bonds eased.

HDFC Bank shares are up less than the NIFTY Bank index over the past year. Ganapathy, the Macquarie analyst, reckons the stock's performance will depend on the growth of the loan book at 18% to 20%, and a 2% return on assets.

"Management is confident of sustaining 2% return on assets and possibly beyond that level even post-merger and also deliver strong loan growth. If they can walk the talk, the stock will re-rate," Ganapathy said in a note.

Image source: Bloomberg