Big shift: SBI moves ahead of HDFC in home loans

The biggest bank in the country is also its top home loan lender.
State Bank of India (SBI) has finally pulled ahead of its long-time, neck-and-neck competitor, the Housing Development Finance Corporation (HDFC).

At the end of December 31, 2010, outstanding loans in the retail segment stood at Rs82,376 crore for SBI, around 11% higher than HDFC’s Rs74,155 crore.

Outstanding retail home loans make up about 13% of SBI’s total outstanding loans.

As per a report released by Icra in June 2010, HDFC Group and SBI had market share of 17% each, based on loans outstanding as of March 31, 2010. In fact, together with ICICI Bank (along with ICICI Home Finance) and LIC Housing Finance, they accounted
for 55% of total housing credit in the country.

A senior SBI official conceded that continuing the teaser scheme helped the bank pull ahead of its closest competitor. “To a large extent, I agree it was due to the extension of teaser loans. But the product had value for the customers.”

SBI is still running the teaser loans scheme and plans to continue it even after March 31, 2011 as the response has been pretty good. The final decision on this will be taken in March, the official said.
For HDFC, the retail portfolio works out to 68% of its outstanding loans of Rs1,09,051 crore as on December 31, 2010. According to a company spokesperson, this does not include Rs11,631 crore of loans securitised (including which the retail book would be higher).

Similarly SBI’s retail portfolio of Rs82,376 crore does not include loans securitised by the bank.

HDFC was offering teaser loans till last November, but discontinued the scheme after the Reserve Bank of India raised concerns about the teaser rate scheme fearing it might increase home loan defaults in the times to come. Under the schemes offered by HDFC, interest rates were 8.50% for the first year (till March 2011), 9.25% for the second year (March 2012) and at floating rate thereafter.

Another factor which dampened sentiments for HDFC was that from December 1, just the day after discontinuing teaser loans, the retail prime lending rate was jacked up by 75 basis points.
On its part, under the teaser loan it was offering till December 31, 2010, SBI charged interest at 8% for the first year, 9% for the second and third years and at a floating rate thereafter. The bank has since linked the teaser loans to its base rate, which currently stands at 8.25%.

“We have never chased market share. We are always for growth, which is manageable without compromising the loan quality or customer service quality,” said the HDFC spokesperson.
As per RBI data, the housing loans outstanding as on December 17, 2010 were Rs3,32,533 crore, up 13.24% year on year. As on December 19, 2008 the figure stood at Rs2,73,071 crore.