HDFC net up 10.8% to Rs 1,723 cr

Rise in individual loan book, improved asset quality drive growth

Housing Development Finance Corporation (HDFC), India’s largest mortgage lender, said on Tuesday its standalone net profit for the March quarter increased 10.8 per cent from a year earlier to Rs 1,723 crore. Growth in individual loan book, stable margin and improved asset quality aided the lender’s earnings performance.

“Contrary to the market, we have not seen any real slowdown in our business in the past two years. Our individual loan book has grown at 26 per cent in 2013-14, on a year-on-year basis. Delhi-NCR (national capital region) continues to be the largest contributor (to growth), followed by Mumbai, Chennai, Bangalore and Pune. Growth has come mainly by volume and not by average ticket size, which increased by 2.5-3.0 per cent in the last financial year,” Keki Mistry, vice-chairman and CEO of HDFC, said in his post-earnings comments.

HDFC’s standalone income from operations rose to Rs 6,493 crore in January-March quarter from Rs 5,561 crore in the year-ago period. Profit on sale of investments also expanded to Rs 128 crore from Rs 105 crore during this period. The unrealised gains on HDFC's listed investment were estimated at Rs 38,213 crore at the end of March, 2014. This excludes the appreciation in the value of unlisted investments.

The spread on loans over the cost of borrowings for the year ended March 31, 2014, stood at 2.29 per cent. Net interest margin for FY14 was 4.1 per cent.

The mortgage lender closed FY14 with total assets of Rs 225,757 crore, an increase of 16 per cent from the previous financial year. The loan book was Rs 197,100 crore at the end of March 2014, compared with Rs 170,046 crore a year earlier. The growth in the total loan book, including the loans sold, was 20 per cent.

Of the total loan book, individual loans had 71 per cent share. As much as 85 per cent of the incremental growth in loan book during the year came from individual loans. The average size of individual loans was Rs 22.1 lakh, compared to Rs 21.6 lakh a year earlier.

“We have intentionally slowed down (the growth in) non-individual loans. We are hoping that once elections are over, the growth in non-individual loans will pick-up,” said Mistry. HDFC’s non-individual loan portfolio grew by nine per cent during the year.

Gross non-performing loans were Rs 1,357 crore at the end of March 2014, representing 0.69 per cent of the portfolio. A quarter ago, gross bad loans were 0.77 per cent of the portfolio. Mistry said the gross bad loan ratio was at its lowest in HDFC’s history.

In the individual portfolio, non-performing loans constituted 0.53 per cent while that of the non-individual portfolio was 1.01 per cent.

According to regulatory norms, HDFC is required to carry a total provision of Rs 1,460 crore. The lender, however, carries an additional provision of Rs 447 crore over the regulatory requirements.

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 this, Tier-I capital was 15.4 per cent.

“HDFC’s results were in line with our estimates... We believe key data point to watch are: Loan growth and movement in spreads (on individual loans), asset quality trends and progress in recovery of a corporate account that became non-performing. We advise to buy HDFC,” said Rahul Shah, vice-president (equity advisory group) at Motilal Oswal Securities in a note.