HFCs report 7.4% rise in Q2 net profit; net operating income up by 15.1%

Housing finance companies (HFCs) posted a 7.4 per cent rise in net profit on a year-on-year (YoY) basis to Rs 5,014 crore in the second quarter (Q2 of FY22) owing to a fall in interest costs.

Sequentially, 10 listed HFCs booked a 26.1 per cent growth in net profit over Rs 3,975 crore in June 2021 (Q1 of FY22).

Benefitting from southward movement of interest rates in the system flush with liquidity, interest costs for the reporting quarter declined by 10.9 per cent YoY to Rs 13,528 crore. They fell sequentially as well but just by 0.3 per cent from Rs 13,567 crore in the June 2021 quarter.

Net operating income (NOI) rose by 15.1 per cent YoY to Rs 8,947 crore in Q2 of FY22. But growth in NOI was relatively lower sequentially with 4.4 per cent rise over the Rs 8,572 crore in the quarter ended June 2021.  

Provisions and write-offs, indicating a burden of setting aside money for standard and stressed assets, grew by a hefty 33.9 per cent YoY to Rs 1,380 crore in Q2 of FY22. Companies had set aside a lesser amount (Rs 1,031 crore) in Q2 of FY21.

The Reserve Bank of India (RBI) had allowed moratorium on payments as well as temporary stay on treating loans overdue above 90 days as non-performing assets (NPAs) in the second quarter of FY21.

In contrast, the provisions and write-offs fell by 33.7 per cent from Rs 2,080 crore in Q1 of FY22, a three-month period marked by the second wave of Covid.

Unlike last year, the RBI did not give a moratorium this time though it announced a one-time restructuring (OTR) for retail and small businesses.    

The loan book of HFCs grew by just six per cent in 12 months compared to nine per cent growth shown by banks in the same period. The loan book of 10 listed entities rose from Rs 8.69 trillion in the quarter ended September 2020 to Rs 9.23 trillion in September 2021. Big firms like HDFC, LIC Housing Finance and Can Fin Housing have a dominant share in the outstanding loan book.

HFC officials said in an intensely-competitive market, some banks have been able to offer fine lending rates due to lower cost of funds. This partly impacted their business prospects in the second quarter.

However, with a short turnaround time and better service quality, HFCs have been able to increase presence across income categories, they added.