Profit, meets expectations
India’s largest mortgage lender Housing Development Finance Corp. Ltd (HDFC) Thursday reported a standalone net profit of ₹2,044.20 crore for the March quarter meeting market expectations.
A Bloomberg poll of 22 analysts had pegged HDFC’S fourth quarter earnings at ₹2,020 crore. HDFC’S profit was down from the ₹2,607.05 crore it posted a year ago. However, the numbers are not strictly comparable because the firm had sold shares in HDFC Standard Life Insurance Co. Ltd for ₹1,513 crore in the March quarter of 2016 and also made a one-time special provision of ₹450 crore.
Income from operations increased 9.9% to ₹8,453.41 crore as it financed more homes.
In a statement, HDFC said its loan book grew to ₹2.96 trillion by the end of March, up 14.3% from a year ago. The company also sold ₹16,027 crore worth of loans in the last 12 months.
When these loans sold are added back, HDFC’S growth in its retail loan book was 23%. In the corporate segment, the growth was 17%, which was largely led by higher demand in commercial lease rental discounting.
“While the impact of demonetization was transitory, it did result in subdued disbursement growth, particularly in the third quarter and part of the fourth quarter of the financial year under review. By the end of the financial year, the individual disbursement growth trajectory began normalising,” HDFC said in an emailed statement.
During the year, HDFC improved its loan spread to 2.33% compared to 2.29% in fiscal 2016. The spread on individual loans was 1.99% and on the nonindividual loans was 3.09%.
The strong growth in loan book and improvement in margins helped HDFC post a 12% growth in operating profit for the March quarter. Provisions for the three months ended March stood at ₹148 crore compared to ₹117 crore the year-ago period.
HDFC maintained its asset quality. Gross non-performing loans at the end of March stood at ₹ 2,378 crore, or about 0.79% of its loan book. The retail book had a gross bad loans ratio of 0.61%, the non-individual loan book 1.16%. The mortgage lender said it had set aside provisions worth over 1% of its loan book.
While the bank’s management refused to guide for growth in the current fiscal, it said that affordable housing was a new segment.“the growth came across the country, especially from outskirts of the cities and smaller towns given our average loan size of ₹25 lakh. We are look ing at affordable housing in a big way,” said Keki Mistry, vice chairman and CEO at HDFC.
The government has provided a big thrust to housing finance by announcing a credit-linked sub sidy scheme under which an interest subsidy of 4% is given on housing loans of up to ₹9 lakh and 3% on housing loans of up to ₹12 lakh.
“HDFC will continue to grow at 15-16% year on year without any deterioration in the asset quality. On relative valuation we prefer other housing finance companies. We continue to maintain neutral rating on the stock,” said Siddharth Purohit analyst at Angel Broking Ltd.
HDFC also declared a fina dividend of ₹15 per equity share