HDFC Bank sees pre-merger loan-to-deposit ratio in 2-3 years, CFO says

Mumbai: HDFC Bank, India's largest private lender, aims to lower its loan-to-deposit ratio (LDR) to pre-merger levels in the next two to three years, its chief financial officer said on Saturday.

The bank's LDR was at around 86-87 per cent prior to its merger with parent Housing Development Finance Corporation in July 2023 and went as high as 110 per cent after the merger, Srinivasan Vaidyanathan said in post-earnings call.

It will take the bank 2-3 years "to get to the high 80s", Vaidyanathan said.

LDR is an important metric for banks as it helps assess their liquidity position by gauging whether they have enough deposits to fund loan growth.

The ratio has remained elevated since the merger and was at around 100 per cent as of end-September.

The bank securitised Rs 19,000 crore ($2.26 billion) of loans in July-September, Vaidyanathan told reporters on a conference call, without providing detail. "The process will play out for 4-5 years."

Loan securitisation involves packaging loans into securities which are then sold to investors.

In the merger, HDFC Bank added a large pool of loans to its portfolio but a much smaller amount of deposits, putting it under pressure to increase the pace at which it raises deposits or to slow loan growth.

In the July-September quarter HDFC Bank's gross loans rose 1.3 per cent versus April-June, while deposits rose 5.1 per cent to Rs 25,00,000 crore.

The bank will look to grow loans slower than the overall banking system in this financial year and above the system level in the next, Vaidyanathan said.

Earlier in the day, HDFC Bank posted a standalone net profit of 168.21 billion rupees for the July-September quarter, up 4 per cent from the previous quarter.

That was above analysts' average forecast of Rs 16,437 crore, LSEG data showed.

Its net interest income - the difference between interest earned and paid - rose nearly 1 per cent from the previous quarter to Rs 30,110 crore.

The bank's core net interest margin was 3.46 per cent on total assets and 3.65 per cent on interest-earning ones, versus 3.47 per cent and 3.66 per cent, respectively, in the previous quarter.

Its end-September gross nonperforming assets ratio stood at 1.36 per cent, up from 1.33 per cent three months earlier.

($1 = 84.0650 Indian rupees)