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India’s largest mortgage lender Housing Development Finance Corporation (HDFC)’s net profit increased a measly 1.21 per cent to Rs 1,360.98 crore from Rs 1,344.66 crore in the April-June quarter a year ago.
A Bloomberg poll of analysts had expected HDFC to post a slightly higher net profit of Rs 1,394 crore.
However, on a consolidated basis, the net profit increased 17.7 per cent to Rs 2,204 crore at the end of June quarter, from Rs 1,873 crore in the same period last year.
The loan book jumped 13.6 per cent to Rs 2,31,224 crore at the end of June quarter compared to Rs 2,03,384 crore a year ago. In the past 12 months, loans worth Rs 10,949 crore were sold and, after adding this amount, the lender recorded a growth in the individual loan portfolio of 23 per cent. The growth in the non-individual loan portfolio was recorded at 10 per cent.
“The growth in loan book would have been higher but for sale of Rs 10,900 crore of loans over the past 12 months. The life insurance saw profits decline 11 per cent to Rs 253 crore. Our positive stance on the mortgage sector (given that penetration is still less than 10 per cent) and value in subsidiaries (that could be unlocked),” said Ravi Shenoy, vice-president, Midcaps Research, Motilal Oswal Securities
The asset quality improved slightly with gross non-performing loans at the end of June quarter at 0.69 per cent of the loan portfolio compared to 0.70 per cent a year ago. The non-performing loans of the individual portfolio stood at 0.54 per cent, while that of the non-individual portfolio stood at 1.04 per cent.
HDFC said the results were not comparable on account of dividend payments from HDFC Bank.
“The income from dividend from HDFC Bank of Rs 315 crore would be booked in the second quarter of the financial year. In the previous year, dividend from HDFC Bank amounting to Rs 269 crore was received in the first quarter. Hence the quarter financials are not comparable,” it said in a release.
The net interest margin for the quarter ended June declined marginally to 3.8 per cent compared to four per cent in the quarter ended March. The spread improved three basis points to 2.31 per cent in the quarter ended June compared to 2.29 per cent in the corresponding quarter in the previous year.
Dismissing concerns over the lack of demand in metros, Keki Mistry, vice-chairman and chief executive officer of HDFC, said Mumbai and Delhi continue to be strong demand centres. He added that the average loan ticket size inched up marginally from an average of Rs 23.30 lakh last year to an average of Rs 23.40 lakh in the June quarter.
The non-banking financial company remained well capitalised as the capital adequacy ratio (without reducing the investment in the HDFC Bank from tier-I capital, while treating it as a 100 per cent risk weight) stood at 18.2 per cent. The lender also plans to raise Rs 5,000 crore by issuing bonds, attached with warrants which will be converted into shares on maturity.
On the issue of merge between HDFC and HDFC Bank, Mistry said the merger would make sense if there were some regulatory relaxations that would be granted.
“HDFC’s balance sheet was not created out of current and saving account deposits but out of long-term funding. But if HDFC is merged with the bank, then we will have to credit for CRR (credit reserve ratio), SLR (statutory liquidity ratio) and priority sector as well. It would be great if only we need to provide for it on the new loans that is disbursed and not on the old balance sheet,” explained Mistry.
