Lowering LDR to boost HDFC Bank

HDFC Bank's June quarter results (Q1FY25), which were in line with the Street estimates, have prompted analysts to say that the ease in the top private lender's loan-to-deposit ratio (LDR) will decide the stock's trajectory in the future.

- NIKITA VASHISHT

HDFC Bank's LDR, which moved past the 100 per cent mark after its mega-merger with erstwhile HDFC Ltd, has been keeping investors on the sidelines as a high ratio suggests the bank may not be able to cover loan losses and huge withdrawals by its customers in case of any unforeseen emergencies.

Analysts broadly see the bank's LDR, the highest among its peers, falling in about two years. This has also led to analysts trimming their loan growth forecast for the bank for the period.

“We believe course correction of the balance sheet will continue for the next 6-7 quarters till LDR falls to below 100 per cent from 105 per cent. We have cut deposit growth to 15 per cent from 16.5 per cent earlier and taken loan growth down to 10 per cent over FY25 and FY26," said analysts at Nuvama Institutional Equities led by Mahrukh Adajania.

In the April-June quarter of FY25, HDFC Bank's loan growth declined 0.9 per cent quarter-on-quarter (Q-o-Q) to ₹24.63 trillion, led by a 5 per cent Q-0-Q dip in corporate and wholesale books.