LIC Housing, Can Fin Homes slip 8% post Q2; HDFC at record high on Q2 hopes

Analysts believe that HDFC was able to gain the market share, especially from other HFCs and even smaller banks, due to its superior liability franchise and lower cost of fund

Shares of housing finance companies (HFCs) traded on a mixed note in Friday’s trading session with LIC Housing Finance and Can Fin Homes declining 8 per cent each after announcement of their July-September quarter (Q2FY22) results, housing finance giant Housing Development Finance Corporation (HDFC) hit a record high of Rs 2,937.75, up 3.3 per cent on the BSE. HDFC surpassed its previous high of Rs 2,895.35 touched on February 16, 2021.

Shares of LIC Housing Finance dipped 8 per cent to Rs 405 after the firm reported 68.7 per cent year on year (YoY) decline in its net profit to Rs 247.86 crore in Q2FY22 on fall in interest income and sharp rise in expenses for impairments.

Net interest income (NII) during the reporting quarter fell by 5.25 per cent to Rs 1,173 crore from Rs 1,238 crore in Q2FY21. The net interest margin moderated from 2.34 per cent in Q2FY21 to 2.0 per cent in Q2FY22. The expenses for impairment on financial instruments jumped to Rs 625 crore in Q2FY22 from Rs 103 crore a year ago.

Shares of Can Fin Homes were also down nearly 8 per cent at Rs 646.35 after the firm reported 4 per cent decline in its net profit at Rs 123.64 crore in Q2FY22. NII was down 8.8 per cent at Rs 191.78 crore from Rs 210.48 crore in previous year quarter. The housing finance company’s gross and net non-performing asset ratios declined sequentially, while increased YoY. In Q2FY22, gross NPA stood at 0.78 per cent from 0.72 per cent in Q2FY21, and of net NPA at 0.47 per cent against 0.46 per cent in a year ago quarter. The stock had hit a record high of Rs 721 on Monday, October 18, 2021.

Meanwhile, the board of directors of HDFC are scheduled to meet on November 1, 2021 to consider and approve Q2FY22 results. Analysts believe that the company was able to gain market share, especially from other HFCs and even smaller banks, due to its superior liability franchise and lower cost of fund.

“A consistent market share loss by HFCs to banks, which we expect will intensify further. Though HDFC still managed to hold its position due to a superior reach and the best-in-class liability franchise, the competition pressure in the housing segment is imminent.  The sharp shift in Stage 2 assets to Stage 3 assets would be a concern; however, the provision buffer provides comfort,” analysts at Emkay Global Financial Services said in HDFC’s Q1 quarter result update.