HDFC third quarter net rises 12%

MUMBAI: Housing Finance Development Corp on Wednesday met expectations with a 12 per cent increase in the third-quarter net profit, as demand for loans from individual home buyers remained healthy despite a slowdown in the economy. Net profit for the October-December period rose to Rs 1,278 crore from Rs 1,140 crore a year earlier, the country’s oldest mortgage lender said.

Net interest margin, or the difference between funding costs and interest earned on loans, was nearly flat at 4 per cent compared with 4.06 per cent a year earlier. Net interest income, which is comparable with revenue for companies in other sectors, rose nearly 16 per cent to Rs 1,829 crore.

While demand for funds has slowed in a weak economy, the housing finance sector has remained somewhat insulated. Individual home buyers, who are driving this demand, have also been repaying their loans regularly, helping lenders offset slippages in other loan categories.

For instance, at HDFC, bad loans in the retail portfolio fell to 0.57 per cent in the December quarter from 0.62 per cent a year earlier. This helped limit its overall non-performing assets – which rose to 0.77 per cent of total loans from 0.75 per cent – despite NPA in the non-individual segment almost doubling to 1.81 per cent.

Vice-chairman Keki Mistry said the lender will focus more on growing its individual loan book. “We expect the loan book to grow in the range of 18-20 per cent,” he said. Mistry predicted its cost of funds to remain flat because “ interest rates are expected to remain stable”.

HDFC’s total outstanding loans grew 19.5 per cent to more thanRs 1.92 lakh crore at the end of December. “Most of the housing finance companies, including HDFC and LIC Housing Finance, have seen growth in loan portfolio,” said Kajal Gandhi, a banking analyst at ICICI Securities.


“We have a positive outlook on the sector.” But competition is intensifying, with banks aggressively targeting the home buyer at a time when demand for funds from other segments of the economy is low. “HDFC has managed to maintain its net interest margin because of its sheer size and good liability management,” said Gandhi.

Rikesh Parikh, vice-president of institutional corporate broking at Motilal Oswal Securities, said HDFC’s plan to focus on smaller cities to boost growth in a slowing economy is a positive sign.

According to him, HDFC’s asset quality has remained healthy over the past several quarters and the trend is likely to continue. The lender’s capital adequacy ratio for the quarter ended December was 19.1 per cent compared with 17.5 per cent a year earlier.