HDFC Bank May Sell Assets To Bring Down Costs — NDTV Profit Exclusive

The lender is keen on bringing down the cost ratio on its balance sheet, while also reducing the credit-deposit ratio, according to the first person quoted above who spoke on the condition of anonymity.

Such loans for sale will include those which do not qualify for priority sector lending tag, the person said. The bank will continue to originate high-quality loans, but will reserve the right to sell them through the securitisation market.

According to the person quoted above, multiple lenders are looking at buying high-quality loans and will be keen on picking up loans from HDFC Bank.

Such sales would also help HDFC Bank in better maintaining its credit-deposit ratio, the person said. As of Dec. 31, the lender's credit-deposit ratio was at 110%.

The ratio of high cost borrowings rose for HDFC Bank after its merger with Housing Development Finance Corp. According to the October-December quarter results, HDFC Bank's borrowings form 21% of the total liabilities compared with 8% before the merger.

In absolute terms, borrowings stood at Rs 7.38 lakh crore as on Dec. 31 compared with Rs 2.09 lakh crore on June 30. The merger between HDFC Bank and HDFC was effective July 1.

The increase in high-cost borrowings has pushed up the cost of funds for the bank as well. As on Dec. 31, the cost of funds for HDFC Bank was at 4.9% compared with 4% as on June 30.

HDFC Bank has already been bringing down high-cost deposits, it disclosed while announcing the third-quarter results. During the quarter, non-retail deposits fell by Rs 11,800 crore, while retail deposits rose by Rs 53,000 crore. This led to a cumulative rise of Rs 41,100 crore on the deposit front.

This was lower than Rs 1.5 lakh crore worth of deposits that the bank added in the April-June quarter and Rs 1.1 lakh crore it added in the July-September period.

According to the person quoted above, the dip in growth was because incremental system deposit growth lagged. Moreover, as other financial products like mutual funds become more attractive, depositors are starting to lose interest in keeping funds with banks, he said.

HDFC Bank continues to maintain a healthy 18-20% share of incremental deposits, according to the person. As inflation starts to wane next financial year and global central banks start reducing benchmark rates, the deposit growth conditions will normalise, he said.

The bank is still focused on doubling its business every four years, the person said.

After the bank announced its third-quarter results, it has seen a sharp sell-off in domestic bourses, with the HDFC Bank stock losing nearly 15%. On Wednesday, the stock closed at Rs 1,455.85 a share, up 1.98% from its previous close.