HDFC Bank sells $717 million of home loans to reduce credit book

In the Indian banking sector, HDFC Bank Limited has made a name for itself as a leader thanks to its cutting-edge goods and services, solid customer service, and steady financial results. HDFC Bank has a vast network of branches and ATMs throughout the nation, which allows it to serve a wide range of customers’ financial needs. The bank’s sound risk management procedures, devoted staff to technology innovation, and strong management team are all factors in its success. In India, HDFC Bank has led the way in digital banking, providing users with safe and easy online money management options.

HDFC Bank Ltd. sold a housing loan portfolio of $717 million:

In response to regulatory pressure on the sector, Indian lender HDFC Bank Ltd. sold a portfolio of housing loans worth roughly 60 billion rupees ($717 million), attempting to further reduce its credit load. Approximately six state-controlled banks purchased the portfolio through private transactions, according to people with knowledge of the situation who wished to remain anonymous because the details are still confidential.

The individuals said that the Mumbai-based bank also sold off a further batch of auto loans totaling roughly 90.6 billion rupees that were packaged into pass-through certificates, a type of fixed income instrument. As Bloomberg revealed in late August, the lender had been in discussions to sell the pool to roughly a dozen regional asset management firms.

The transactions verify that the biggest bank in India based on market value is stepping up efforts to reduce the amount of retail loans it offers in response to increased regulatory pressure to raise the industry’s credit-deposit ratios, which show how much of an institution’s deposits are being lent out. The sale of the portfolio would assist HDFC Bank in improving its ratio, which has gotten worse recently as the country’s credit growth has outpaced deposit growth and after the bank merged with the mortgage lender Housing Development Finance Corp.

SBI Fund confirmed the car-loan deal:

SBI Funds Management Pvt., ICICI Prudential AMC, Nippon Life India Asset Management Ltd., and Kotak Mahindra Asset Management Co. were among the purchasers who subscribed to the pass-through certificates, which were backed by HDFC’s auto loans, according to the sources. The certificates, according to them, offered yields for three tranches that varied from 8.02% to 8.20% per month. An SBI Fund representative verified the car loan arrangement. Requests for comments from Bloomberg were not immediately answered by HDFC Bank or other buyer funds.

In June, HDFC sold a collection of loans for 50 billion rupees:

In June, HDFC also sold a collection of loans totaling 50 billion rupees. According to ICRA Ltd., a Moody’s Ratings affiliate, as of the end of March, its credit-deposit ratio was 104%, higher than the 85% to 88% rate in the three previous fiscal years. The central bank stated in August that the fact that deposit growth is not keeping up with credit growth “may potentially expose the banking system to structural liquidity issues.”

According to Suresh Ganapathy, head of Macquarie Capital’s financial services research, HDFC Bank is expected to report on earnings for the quarter ended in September that shows 13% year-over-year growth in deposits and 8% growth in loans.

The intraday drop in HDFC Bank’s stock is greater than 1%:

HDFC Bank Ltd stock is trading right now at Rs. 1,760.05 per share, where low traded price is Rs. 1758.20 per share because HDFC Bank has sold a housing loan portfolio of about 60 billion rupees ($717 million)

Conclusion: HDFC Bank Ltd. sold a $717 million housing loan portfolio in order to control and reduce its credit load, which had a minor negative impact on the stock price.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.