HDFC Bank Ltd., an Indian lender, has liquidated a home loan portfolio worth about Rs 60 billion ($717 million), attempting to further lessen its credit load in the face of regulatory constraints on the industry.
According to persons familiar with the subject, the portfolio was sold to approximately half a dozen state-controlled banks in private negotiations. They asked not to be identified since the information is not yet public.
The Mumbai-based bank also unloaded another pool of vehicle loans worth around Rs 90.6 billion, which were securitized in a fixed income instrument known as pass-through certificates, according to the sources. Bloomberg reported in late August that the lender was in negotiations with nearly a dozen local asset management businesses to sell the pool.
The transactions suggest that India's largest bank in terms of market value is stepping up attempts to reduce its retail loan portfolio in the face of increased regulatory pressure to lower the sector's credit-deposit ratios, which assess how much of an institution's deposits are lent out. The portfolio sales would help HDFC Bank strengthen its ratio, which has deteriorated in recent years as loan growth has outpaced deposit growth in the country and after its merger with mortgage lender Housing Development Finance Corp.
According to the sources, buyers of the pass-through certificates backed by HDFC vehicle loans included ICICI Prudential AMC, Nippon Life India Asset Management Ltd., SBI Funds Management Pvt. and Kotak Mahindra Asset Management Co. The certificates provided yields in the range of 8.02% to 8.20% per month for three tranches, they said.
A spokesman for SBI Fund verified the auto loan transaction. HDFC Bank and other buying funds did not immediately react to Bloomberg's queries for comment.
Liquidity Issues
In June, HDFC also sold a credit portfolio for 50 billion rupees. According to ICRA Ltd., a subsidiary of Moody's Ratings, the credit-deposit ratio was 104% at the end of March, up from 85% to 88% in the preceding three fiscal years.
The fact that deposit growth is trailing credit growth "may potentially expose the banking system to structural liquidity issues," the central bank said in August.
According to Suresh Ganapathy, head of financial services research at Macquarie Capital, HDFC Bank's next earnings report for the quarter ending September is projected to show 13% year-on-year deposit growth vs an 8% increase in loans.
