HDFC-HDFC Bank merger: Bringing synergy to the rebranding of the merged entity

There were always some discussions going on regarding the HDFC-HDFC Bank merger, which date back to 2014. Hence, the deal has been in the works for many years. HDFC and HDFC Bank have an agreement, whereby the parent company will sell a certain portion of its loans to the bank every quarter. For the bank, this was the only exposure to the home loans business. Therefore, owing to the complementary nature of businesses and the cost synergies, particularly for the home loan business, the deal made sense to both and today, we will have only one entity, that is, HDFC Bank. Actually, the current crop of consumers may not relate so strongly with HDFC Loans, but their association with HDFC Bank will be deeper and stronger.

Earlier, when you were planning to take a housing loan, you approached HDFC (Housing Development Finance Corporation), who were primarily only disbursing housing loans. But with this merger, the loan portfolio will come under HDFC Bank’s umbrella, like many other financial services that the bank is offering. I think the consumer always saw them as HDFC, but it took some time for them to take a decision to bring this under one umbrella brand.

HDFC has many other subsidiaries, like HDFC Life, HDFC ERGO General Insurance, HDFC Securities and HDFC Red, and they are all separate organisations. But the public simply connects with the bank’s name, that is, HDFC Bank. HDFC Bank enjoys a great brand recall because of its excellent PR and advertising campaigns, and also because their earlier Chairman Aditya Puri was seen has a voice of authority in the banking circle and a thought leader. His presence also helped the bank to manage the external communication very efficiently. Puri was instrumental in giving the bank a very strong foundation and built the equity of the brand, which has helped the other businesses to piggyback on it.

This merger is a win-win situation for both the entities since as a brand both of them are fundamentally very strong financially and have good equity in the market and with the external stakeholders. This merger will also enable HDFC Bank to build its housing loan portfolio and also get a strong customer base to expand and penetrate in the banking services and do cross-selling of several financial products which could help them to get a large pie of the share. The housing loan market is at the cusp of a strong up-cycle along with tailwinds for the real estate sector, and with a robust growth expected in the infrastructure in the coming years, this will only further strengthen their position. Now, it remains to be seen how they will marry the brand from a communication and branding point of view to reposition themselves as one strong and giant financial brand.

When it comes to banking and finance, there is always an emotional connect with the brand. In the case of HDFC, the strong equity, especially the trust factor, that has had will certainly have some rub-off as they get merged with HDFC Bank. Any kind of rebranding or repositioning of a large merger, especially in the highly competitive financial sector, is always a challenge, but one needs to view the overall situation of the two big brands before planning the communication process and deciding on a strategy which will benefit overall the mother brand in fortifying their position in the market.

Sharing his perspective, Lloyd Mathias, Business Strategist and Independent Director, said that the merger of two strong entities – HDFC Limited into HDFC Bank – will make HDFC Bank India’s second largest bank pulling ahead of the others, with the gap between HDFC Bank and State Bank of India at about Rs 6–7 lakh crore.

“Besides the cost optimisation and HDFC Bank inheriting a ready home-loan portfolio the big advantage will be in brand synergies – commonality of messaging; better scale in media buying and larger consumer reach.  Consequently, these will help drive awareness, recall and enable lower cost customer acquisition,” he added.

Mathias further said, “Both home loans and banking being mass financial products, HDFC will now be a significant player across both and will be able to leverage its strong brand to reach consumers more effectively. Banking being deeper penetrated it will help the home loan business grow. Also, with the increased turnover the marketing outlay can be increased ever so slightly to drive huge returns.”

Apart from the business synergies, this merger brings together brand synergies for both the brands. Commenting on this merger, Ajit Devraj, Managing Partner, Dentsu Impact, said, “While both are leading and well-established brands, there are unique attributes that could potentially get associated with each of them. HDFC Bank definitely has a greater scale, which adds to the stature and leadership credentials of the brand. Whereas for HDFC, there is a strong rub-off of the trust, credibility and professionalism that HDFC bank enjoys. The access to financial services at scale and almost all across India will be a huge opportunity that the merger will offer.”

According to Devraj, “For the end consumer, HDFC will now play a bigger role in their lives and it can potentially have a larger footprint in the minds of the consumers. This merger will also give the consolidated brand much more stature in the eyes of the consumers.” 

He further said, “Rebranding can help draw attention to the merger and is a huge opportunity to make a statement in the market. However, given the stature of both the brands, it will be imperative to ensure that they do not dilute the core strengths of each brand. Thus, the rebranding activity has to be very carefully conceptualised and executed.”

Looking from a branding POV, a merger offers both opportunities and potential pitfalls that should be carefully negotiated, remarked Nisha Sampat, Managing Partner,Bright Angles Consulting LLP. According to her, “Both brands that are being merged will need to align and build on their root strengths and past equity to ensure that the new whole is greater than the sum of the older parts. HDFC Bank is the image driver, as it is modern and consumer-centric unlike the parent entity. But HDFC Ltd has disbursed housing loans over generations of Indians and can contribute an emotional connect and substantial goodwill and credibility. It is important that these aspects are not lost, but synergised during the re-branding exercise. The re-branding exercise can bring a depth of meaning to the merger, by showing how it will benefit end consumers. Hence, it is definitely an exercise of value to the brand. While some amount of education and messages will have to be created through their brand communication efforts but there will not be need of some large-scale rebranding exercise as the brand is deeply etched in the consumers mind as a financial conglomerate.”

Generally, consumers always expect that mergers will bring them greater convenience and seamless access to all solutions under one roof.  Paradoxically, consumers also fear that when a business grows larger, the smaller customers lose importance. “Hence, it will become extremely important to design a consumer experience that brings the brand promise to life on ground, while addressing their expectations and concerns. In my opinion, the consumer experience design will be as important, if not more important than conventional communication, to build the future equity of HDFC as a power brand,” Sampat noted.

Ashwini Deshpande, Founder & Director, Elephant Design, added here that a merger of such large entities in a domain that takes years to establish trust is a challenge and there is a huge opportunity for branding. 

She pointed out that while the names are similar, the visual identities and tone of voice of the two entities have been quite different. “Bank has had more opportunities to establish its visual equity due retail facings. The loan side of business has had longer, deeper, and almost monopolistic association with end users. There are other entities that also have the HDFC badge – like HDFC life and HDFC Ergo,” she observed. 

This may be the perfect opportunity to examine commonalities of purpose and use them to advantage of the new entity. A good time for rediscovering a common, fresh, and forward-thinking brand promise followed by brand assets like visual identity, tone of voice, sonic branding, etc.