HDFC Bank to Securitise Over Rs 12,000 Crore in Car Loans

HDFC Bank, one of India’s leading private lenders, plans to securitise car loans worth Rs.12,372 crore and sell them to mutual funds by early December. This is part of the bank’s strategy to reduce loan assets on its balance sheet and improve its loan-to-deposit ratio, which currently stands at 100%, higher than the industry average of 80%.

Details of the Securitisation Plan

This will be HDFC Bank’s second pass-through certificate (PTC) issuance in the current financial year. The certificates, rated AAA (SO) by India Ratings and Research, will be issued in three tranches with maturities in 2026, 2027, and 2030.

The loan pool backing the PTCs includes nearly 1.83 lakh car loans with a weighted average seasoning of 17.5 months and an amortisation of 23.3%, indicating a good repayment record. The weighted average interest rate of these loans is 8.91%. HDFC Bank is to offer the PTCs at a rate of 8.3% – 8.4%, similar to its September issuance when it securitised Rs.10,000 crore worth of auto loans.

Asset Sales to Control Credit-Deposit Ratio

HDFC Bank’s merger with Housing Development Finance Corporation in July 2023 pushed its credit deposit ratio to 110%. To bring this back in check, the bank has been actively selling off assets. In the July-September quarter, Rs.19,000 crore worth of loans were sold via direct assignment. There’s also talk about an upcoming Rs.60,000-70,000 crore loan sale through the same route.

With deposits rising 15% year-on-year to Rs.25 lakh crore and loans growing 7% to Rs.24.95 lakh crore as of September 2024, this now is part of a broader strategy to manage liquidity and risk effectively.

HDFC Bank shares are currently trading at Rs.1740.00 , up over 3% year to date and 15% in the past year.

Conclusion: By securitising over Rs.12,000 crore in car loans, HDFC Bank is to efficiently manage its balance sheet and align its credit-deposit ratio closer to industry norms. With a loan book of Rs.24.95 lakh crore and deposits of Rs.25 lakh crore as of September 2024, such initiatives will only add to its stability and market position.

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.