HDFC net rises 15%, beats Street estimates

Marginal rise in gross NPAs during June quarter

Housing Development and Finance Corporation (HDFC), the country’s largest mortgage financier, reported a 15 per cent growth in net profit to Rs 1,345 crore for the quarter ended June, as compared to Rs 1,173 crore during the same period of the previous year, on the back of 17 per cent net loan growth to individuals.

The non-banking finance company has provided Rs 75 crore towards deferred tax liability on special reserves, an item introduced from the April-June quarter.

Income from operations rose 16 per cent to Rs 6,447 crore, while profit on sale of investment was negligible during the period under review. Its loan book as on end-June was Rs 2.03 lakh crore, a 14.7 per cent increase over a year. The individual loan book growth (including loans sold) was 23 per cent.

“Of the total loan book, individual loans comprise 71 per cent. Further, 86 per cent of the incremental growth in the loan book during the quarter came from individual loans,” said HDFC.

Its shares went up after the earnings announcements, as the net profit was in line with the Street estimate. According to a Bloomberg estimate, net profit for the first quarter of the current financial year was Rs 1,348 crore. HDFC shares closed the day at Rs 1,011.05, an increase of three per cent in the BSE exchange as compared to a 0.3 per cent rise in the benchmark indices.

“There has been growth in the individual segment. The non-individual segment is a function of the state of the economy. We are beginning to see signs of some improvement on the non-individual front and its proportion is expected to grow in the second half of the year,” said Keki Mistry, vice-chairman and chief executive officer.

The spread on loans over cost of borrowing was stable at 2.29 per cent for the reporting quarter. “On a sequential basis, there was a marginal decline in margins but it is not fair to compare the fourth quarter and the first quarter of a financial year, as NPAs (non-performing assets) are at the lowest in the fourth quarter. Margin levels might pick up towards the second half of the year,” said Mistry.

On asset quality, the lender reported a marginal increase in gross NPAs at Rs 1,434 crore or 0.7 per cent of the total loan portfolio as on end-June, as compared to Rs 1,357 crore as on end-March or 0.69 per cent. HFDC’s gross NPA ratio is one of the lowest in the sector. Those of the individual portfolio were 0.55 per cent and of the non-individual portfolio at 1.01 per cent, it said.

It has made a provision of Rs 1,502 crore during the quarter, of which Rs 464 crore was towards bad loans and the remaining Rs 1,461 crore was with respect to general provisioning on standard assets.

“The Corporation carries an additional provision of Rs 423 crore over the regulatory requirements,” said HDFC.

HDFC’s capital adequacy ratio, without reducing the investment in HDFC Bank from tier-I capital, while treating it as a 100 per cent risk weight, stood at 17.9 per cent, of which tier-I capital was 15.6 per cent and tier-II capital was 2.3 per cent.

On Reserve Bank of India's monetary policy review, scheduled in the first week of next month, Mistry said status quo was likely but, \"I wouldn’t be surprised if there is a marginal, say, quarter per cent reduction in interest rates."