HDFC nos quell slump fears, net climbs 20%

MUMBAI: Housing Development Finance Corp (HDFC), the nation’s largest mortgate lender, forecast a 20% increase in loans for the fiscal despite 12 interest rate increases by the Reserve Bank of India, as aggregate demand remains strong, contrary to slowdown fears.

The home loan provider said the most expensive real estate market in Mumbai may be facing slowing sales, but demand in the rest of the country was strong as farm incomes and government welfare schemes boost rural economy.

“The loan growth should hover in the range of 18-20%,” said Keki Mistry, vice-chairman and managing director at HDFC, after releasing the quarterly earnings. “Loan demand is coming from tier I, tier II and tier III centres. However, in Mumbai, the demand is slowing,” he added. The Mumbai-based company said the September quarter earnings rose 20%, aided by gains from sale of investments, to Rs 970 crore. Income from operations rose 28% to Rs 7,877.72 crore, from Rs 5703.68 crore a year ago.

Real estate companies have been calling for a halt to raising interest rates by RBI as it dampens demand. But the central bank has been citing higher asset prices, that could derail long-term growth, for the increases. The rise in income in nonmetro cities is more than compensating for sluggishness in cities such as Mumbai where prices have more than doubled since the brief 2008 lows.

Because of the attractiveness of the home loan market, there could be increased competition from banks which look for avenues to deploy funds when demand from companies falls. “It’s not a major surprise and the profit from sale of investment is legitimate,” said ASV Krishnan, banking analyst at Ambit Capital.

“But it may be too ambitious for HDFC to assume a loan growth of 19-20% as banks are expected to get aggressive. With corporate loan demand slowing down, banks would move to safer havens to boost their balance sheet growth which will come from secured retail products like home loans,” he added.

Profits from sale of investment rose 75% to Rs 103.14 crore. Net interest income (NII) rose 17% to Rs 2,672.28 crore at the end of September 2011 against Rs 2,266.54 crore in the corresponding period last year.

After selling loans worth Rs 4,989 crore to HDFC Bank, its total loans grew 19% from a year earlier to Rs 1,26,992 crore. Net interest margin (NIM), a measure of profitability, was stable at 4.3%.