HDFC Bank mulling loan portfolio sale? Report claims lender making queries

HDFC Bank is reportedly exploring the sale of a loans portfolio amid heightened regulatory scrutiny due to surging credit growth.

The bank, according to a Bloomberg report, has reached out to public sector lenders, non-banking finance companies, insurance firms, and asset managers to gauge interest in the sale. Business Today could not independently verify the report. 

The Reserve Bank of India is closely monitoring the credit-deposit ratio—a measure of how much of a bank’s deposits are being lent out, the report further added. This ratio is at a decade high for the industry. The bank's shares saw their biggest drop in a month on Friday after reporting flat sequential deposit growth for the quarter ended June.

Both loan and deposit growths are generally seasonally soft for HDFC Bank in the June quarter. The private lender saw 1-3 per cent sequential Q1 growth in loans and deposits in the last three years. 

But the reported numbers this time are a tad lower than usual, Nomura India said in its latest note.

Following the Q1 update, the HDFC Bank stock fell 4.19 per cent to hit a low of Rs 1,654.25 on BSE. HDFC Bank reported 11 per cent year-on-year or flat sequential growth in its gross asset under management (AUM) on a pro- forma basis. Net of loan sell-downs, gross loans declined 0.8 per cent sequentially, while YoY growth stood at a soft 10.8 per cent YoY.

Deposit growth was soft during the quarter, growing at 15.3 per cent YoY on a pro-forma basis, and flat QoQ. CASA declined 5 per cent QoQ, and as a result the CASA ratio was down 190 bps sequentially to 36 per cent.

"HDFC Bank's loan and deposit growth (on pro-forma basis) are tracking below our FY25F estimates of 12 per cent YoY and 17 per cent YoY, respectively. While HDFCB’s balance sheet course correction is underway, we believe this process will be gradual. At current valuations (2.3x one-year forward BVPS), we do not see a case for significant outperformance vs other private banks. Maintain Neutral," Nomura India said, suggesting a target price of Rs 1,660 on the stock.