Mistry says the only cause of worry for the lender amid global economic uncertainty was a possible loss of consumer confidence.
Mumbai:
India’s oldest mortgage lender, Housing Development Finance Corp. Ltd (HDFC),
posted a 10.14% increase in profit during the three months ended 31 December on
sustained demand for home loans, but fell short of analyst expectations as it
earned less from the sale of investments.
Net
profit in the fiscal third quarter rose to Rs. 981.25 crore from Rs. 890.88
crore in the year-ago period, HDFC said on Thursday. The lender missed the
estimate of 15 analysts polled by Bloomberg, which had pegged its net
profit at Rs. 1,010 crore. Earnings per share increased to Rs. 6.56 from Rs.
5.91 in the year-ago period. Revenue increased 35% to Rs. 4,472.51 crore from Rs.
3,321.04 crore.
HDFC shares ended up 0.9% to close
at Rs. 687.50 on BSE on a day the Sensex fell marginally by 0.86%.
The
reason behind HDFC’s lower-than-expected net profit was a drop in profit from
sale of investments to Rs. 87.99 crore from Rs. 167.22 crore in the year-ago
quarter.
Keki
Mistry, vice-chairman and chief executive officer, told television channels
that demand for home loans continues to be strong despite a slowdown in some
markets, including Mumbai. “We
have seen a 19% rise in both approvals and disbursements in the first nine
months to December and our loan book has grown 21%,” he said.
HDFC’s
loan book expanded to Rs. 1.32 trillion from Rs. 1.09 trillion in December
2010, even after it sold loans worth Rs. 4,221 crore, Mistry said.
“If
we had not sold those loans, the growth would have been stronger at 25%,” he
said. The
mortgage lender has agreements with HDFC Bank Ltd and IndusInd Bank Ltd to
sell home loans.
HDFC’s
corporate loan growth, inclusive of loans sold, was 25%, while retail loans
increased by 26%, indicating that demand for loans is coming from both
individuals to buy properties as well as builders to construct projects, said
Ankit Ladhani, an analyst at Sharekhan Ltd.
“The
results are in line with our expectations of Rs. 993 crore net profit. Going
forward, given HDFC’s track record and the fact that demand for homes
continues, they should not find it difficult to meet their 18-20% target,” he
said.
About
two-thirds of HDFC’s loans go to individuals, with the remaining lent to
builders as project finance.
Mistry
said loan approvals increased at a slightly faster pace in the quarter ended
December, which led to an average of 19% growth in both approvals and
disbursements.
“In
the first six months, loan approvals grew 18%, while disbursements rose by 19%.
This time approvals have risen 20%, while disbursements have kept pace at 19%
growth,” he said. HDFC did not give absolute numbers for loan approvals and
disbursements.
The
lender’s net interest income (interest earned minus interest expended)
increased 18% to Rs. 1,235 crore from Rs. 1,040 crore a year ago, while its net
interest margin (NIM) was 4.3% in the three months to December, Mistry said.
“NIM
has been stable at 4.3% all through the year and though we do not expect it to
change in the last quarter of the fiscal, next year it could improve as
interest rates are likely to fall,” he added.
NIM
is the difference between the rate of interest charged for loans and that paid
for funds, and is considered a key measure of a financial firm’s profitability.
Another
critical efficiency parameter is the portion of non-performing assets (NPAs) as
a percentage of assets. For the 28th consecutive quarter, HDFC’s gross NPAs
dropped. In percentage terms, it is 0.82% of assets, down from 0.85% a year
ago.
Amid
global economic uncertainty, the only cause of worry for the firm is a possible
loss of consumer confidence, Mistry said.
“So
far it’s been good and we have maintained our guidance, but if people lose
confidence that they will keep their jobs, then that could have an impact on
home demand,” he said.
HDFC
has met its guidance because of sustained home loan demand from across the
country even though markets such as Mumbai and Gurgaon have slowed, Mistry
said. Source: Mint
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