HDFC retail loan demand at 8-year high, standalone net profit rises 18%

Shifted from quarterly reset for individual loans to monthly one

Mortgage financier HDFC reported an 18 per cent year-on-year (YoY) jump in standalone net profit in July-September (Q2FY23) quarter, aided by healthy interest income and slightly higher dividend income, and retail loan sales, which hit an 8-year high of 36 per cent. 

The financer reported a profit after tax of Rs 4,454.24 crore in the quarter under review, beating street estimates, as analysts at Bloomberg had predicted a profit of Rs 4,277 crore. 

Net interest income (NII) of the lender grew 13 per cent YoY to Rs 4,639.25 crore, on the back of healthy credit growth. Net interest margin (NIM), a measure of profitability, of the lender was at 3.4 per cent compared to 3.6 per cent in the year-ago period, due to lag in transmission of rate hikes.

The monetary policy and interest rate actions have had a short-term impact on the NII and to a lesser extent on the NIM, the lender said in a statement. The corporation has increased its benchmark lending rates and has incrementally shifted from a quarterly reset for individual loans to a monthly reset to reduce the impact of transmission of rate changes, it said. 

Asset quality of the lender improved with gross non-performing assets (NPAs) declining 19 basis points sequentially to 1.59 per cent at the end of the September quarter. Gross NPAs for the individual segment stood at 0.91 per cent, while for the non-individual segment it stood at 4 per cent.

Assets under management (AUM) of the mortgage financier rose 15.5 per cent YoY to Rs 6.9 trillion as of September quarter and adjusted for loans sold, it was up 14.3 per cent YoY to Rs 5.95 trillion. Loans to individuals grew 20 per cent YoY and constituted 81 per cent of total outstanding loans. 

The demand for home loans continues to remain strong. Growth in home loans was seen in both the mid-income segment as well as high end properties, the lender said. 

“The growth is broad-based and is happening in every part of the country. The metros were not contributing much to business two years ago. Now, business in metros is growing at a brisk pace,” said Keki Mistry, vice-chairman & CEO, HDFC Ltd. The contribution of Tier-2 and below cities in growth has come down slightly, not because they have grown slower but because the metros have grown faster, he said.

The lender provided for Rs 473 crore in the period under review as expected credit loss and holds a provision of Rs 13,146 crore as of September 2022.

Shares of the lender closed 0.41 per cent at Rs 2,497.25 on the BSE.