HDFC Bank's Loan Growth Slows in Q2 Amid Strategic Moves and Major Stake Purchases

On October 4, HDFC Bank's shares saw a little increase in value following the announcement that the bank's loans grew more slowly in the second quarter of its fiscal year. Gross advances, or loans approved and disbursed, for the Mumbai-based bank increased 1.3% to ₹ 25.19 lakh crore in the quarter that ended in September after declining by 0.8% the previous quarter. On October 4, at 11:03 am, HDFC Bank's shares were up 0.1% at ₹ 1,684 a share.

In comparison to a quarter ago, retail loans increased by around ₹33,800 crore, while loans from commercial and rural banks increased by about ₹38,000 crore, according to a statement from HDFC Bank. According to the report, corporate and other wholesale loans decreased by ₹13,300 crore from a quarter prior.

Deposits had no sequential change in April–June, but increased 5.1% from the previous quarter to ₹25 lakh crore.  The total amount deposited into low-cost current and savings accounts increased by 2.3%.  In July 2023, HDFC Bank amalgamated with parent company HDFC, gaining a substantial loan portfolio but a negligible deposit base as a result of the merger.

Following the merger, the bank's loan-to-deposit ratio (LDR) increased to approximately 110%, placing pressure on it to either accelerate deposit growth or decelerate loan growth.

Banks use the liquidity distribution ratio (LDR) to evaluate their liquidity status by determining if they have sufficient deposits to support loan growth.

Since deposits will increase more quickly than loans in the upcoming quarters, HDFC Bank had stated in July that it intended to lower the LDR. The bank stated that as a strategic move, it securitized loans totaling ₹19,200 crore during the September quarter. The bank has securitized loans totaling ₹24,600 crore so far this year. In the meantime, on October 3, open market deals saw Morgan Stanley and Citigroup pay more than ₹755 crore for shares of HDFC Bank, a private sector lender.

The financial services firms Morgan Stanley and Citigroup, with their headquarters in New York, bought 43.75 lakh shares of the Mumbai-based bank through their affiliates, according to block deal data that is public on the BSE. At an average price of ₹1,726.2 per share, the shares were acquired, bringing the total transaction value to ₹755.29 crore. The identical number of shares were sold by BNP Paribas Financial Markets, the company's affiliate, in two different block trades on the BSE for ₹ 1,726.2 apiece, according to exchange data.

Financial services and investment banking are provided by BNP Paribas. BNP Paribas, a Paris-based financial firm, sold HDFC Bank shares last week for a total of ₹543.27 crore.

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To Summarize

HDFC Bank saw modest growth in its shares on October 4 after reporting a slower loan growth of 1.3% to ₹25.19 lakh crore in the second quarter. Retail loans grew by ₹33,800 crore, while commercial and rural loans rose by ₹38,000 crore. However, corporate loans decreased by ₹13,300 crore. Deposits increased by 5.1% to ₹25 lakh crore. The bank, following its merger with HDFC, is focusing on reducing its loan-to-deposit ratio by securitizing loans worth ₹19,200 crore. Meanwhile, Morgan Stanley and Citigroup acquired 43.75 lakh shares of HDFC Bank for ₹755 crore in block deals.