Bernstein SocGen Group maintained its Outperform rating on HDFC Bank Ltd (HDFCB:IN) (NYSE: HDB), with a price target of INR2,100.00. The bank is reportedly engaging in the sale of portions of its auto and home loans portfolio, potentially amounting to INR 700 billion, equivalent to roughly 3% of its total loan book.
The sales are being executed through both direct loan sales and Pass through Certificates to various investors, including funds and other banking institutions.
This move by HDFC Bank is part of a broader strategy to rebalance its balance sheet. The bank aims to reduce its Loan to Deposit Ratio (LDR) and lower the proportion of borrowings in its liabilities. This strategy is in response to the tight liquidity conditions in the market and regulatory pressures to maintain lower LDRs.
As part of this approach, HDFC Bank has also moderated its loan growth and has been replacing borrowings from eHDFCL with infrastructure bonds.
In addition to these measures, HDFC Bank has experienced a faster than anticipated reduction in borrowings. In the first quarter of 2025, the bank saw a run down of approximately INR 600 billion in borrowings, exceeding the expected figure of around INR 250 billion.
These steps are deemed necessary to adjust the bank's financial structure despite HDFC Bank's strong incremental market share in deposits.
The bank's actions reflect a proactive stance in managing its financial health amid challenging market conditions. By selling off parts of its loan portfolio and taking measures to improve its Net Interest Margin (NIM), HDFC Bank is working towards achieving a more stable and efficient balance sheet. The Outperform rating by Bernstein SocGen Group indicates confidence in the bank's strategy and its execution.
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