HDFC Bank's LDR falls below 100% for the first time after merger

HDFC Bank's LDR was around 87 per cent pre-merger. Following the merger, its LDR went up to 110 per cent

HDFC Bank’s loan-to-deposit ratio (LDR) fell below 100 per cent for the first time since its merger with the erstwhile HDFC Ltd, due to slower loan growth and the securitisation of a sizeable portion of loans in the 2024-25 (FY25) October-December (Q3) quarter.

 

At the end of the December quarter, HDFC Bank’s LDR stood at 99.2 per cent, down from 100.76 per cent in the second quarter (Q2) of FY25 and 111.53 per cent in Q3 of 2023-24.

 

The easing of the LDR aligns with the bank’s guidance, which indicated that it would grow its loan book more slowly than the system in FY25 to reduce its elevated LDR to pre-merger levels. Further, the bank has said that in 2025-26, it plans to grow its loan book in line with system growth, and in 2026-27, it aims to outpace the system in loan book expansion.

 

HDFC Bank’s LDR was around 87 per cent pre-merger. Following the merger, its LDR increased to 110 per cent. The erstwhile mortgage financier HDFC Ltd. merged into HDFC Bank on July 1, 2023, adding a large pool of loans to its portfolio but a much smaller volume of deposits.

 

According to the bank’s Q3 business update, its period-end (gross) advances grew by a meagre 0.9 per cent sequentially and 3 per cent year-on-year (Y-o-Y) to Rs 25.42 trillion in Q3FY25, which is much slower than what the market had anticipated. 

 

Meanwhile, the lender’s average advances under management, which include advances grossed up for interbank participation certificates, bills rediscounted, and securitisation/assignment, stood at Rs 26.27 trillion for the December 2024 quarter, reflecting a Y-o-Y growth of roughly 7.6 per cent and a sequential growth of around 2.5 per cent.

 

Segment-wise, while retail loans grew by around 10 per cent Y-o-Y, commercial and rural banking loans grew by around 11.5 per cent Y-o-Y, and corporate and other wholesale loans were lower by around 10.3 per cent Y-o-Y. According to an IIFL note, the loan mix of the bank bodes well for net interest margin in Q3.

 

Meanwhile, the bank has highlighted that it securitised Rs 21,600 crore in Q3, and in the financial year so far, the bank has securitised Rs 46,300 crore worth of loans as a strategic initiative.

 

Separately, the bank's period-end deposits grew 15.8 per cent Y-o-Y and 2.5 per cent sequentially, reaching Rs 25.63 trillion in Q3FY25, considerably outpacing its loan growth. On an absolute basis, deposit accretion by the bank in Q3 was Rs 63,500 crore, much slower than market expectations. In Q2, HDFC Bank had mobilised deposits to the tune of Rs 1.2 trillion.

 

In deposits, the bank saw strong growth in time deposits, which increased by 4.6 per cent sequentially and 22.7 per cent Y-o-Y, reaching Rs 16.91 trillion in Q3FY25. However, current account savings account (casa) deposits grew a modest 4.4 per cent Y-o-Y and contracted slightly on a sequential basis. The bank’s Casa ratio has declined by 130 basis points sequentially to 34 per cent in Q3FY25.

 

Meanwhile, the bank’s average deposits stood at Rs 24.52 trillion, up almost 16 per cent Y-o-Y from the corresponding period last year and 4.2 per cent sequentially.