Mumbai: The country’s oldest mortgage lender Housing Development Finance Corp., or HDFC, on Friday reported a 32.42% rise in its net profit to Rs534.23 crore for the quarter to September, over that of the corresponding period a year ago, on higher interest income.
India’s oldest housing financier has seen a marginal drop in corporate demand for home loans but the demand from individual borrowers remained strong, showing a growth of at least 30%, vice-chairman Keki Mistry said.
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Interest income was up 26.50% at Rs2,503 crore and other income increased by 56.35% to Rs111.73 crore. Total income was up 27.78% to Rs2,615.10 crore.
Loan approvals during the six months to 30 September rose by 28% to Rs24,180 crore, against Rs18,948 crore in the same period last year. Loan disbursements for the period rose by 25% to Rs17,788 crore.
“We expect to maintain the growth rate. We have not seen slowdown in individual demand for loans,” said Conrad D’Souza, senior general manager, treasury, HDFC.
However, a banking analyst with a Mumbai-based brokerage who did not wish to be named, said: “We will see some slowdown in the second half considering that the industry on the whole is seeing some slowdown in demand. HDFC will have to align with the system as it will face pressure on the funding side.”
According to D’souza,there is no significant change in the cost of funds for theinstitution. It is at 9.35%, almost the level of last year. In fact, its net interest margin, or the spread between the cost of funds and earnings on deployment of such funds, forthe quarter to September dipped marginally to 2.24% from 2.26% in the same quarter last year.
“Our target was to achieve a net interest margin anywhere in the range of 2.23-2.22% and we have exceeded our target,” said D’souza.
India’s banking regulator had raised its policy rate by 125 basis points between April and June and banks’ cash reserve ratio (CRR), or the funds that commercial banks are required to keep with the Reserve Bank of India, or RBI, by 150 basis points to squeeze liquidity from the system and fight rising inflation. This has made money dearer.
RBI, however, has changed its stance and cut CRR by 250 basis points recently to infuse liquidity as the financial system saw an unprecedented liquidity crunch. One basis point is one hundredth of a percentage point.
The HDFC stock price on Friday dropped 1.37% to close at Rs1,776.55 on the Bombay Stock Exchange even as the bellwether Sensex index lost 5.73%.
HDFC shares are down 38.15% so far in 2008 compared with a 50.83% fall in the benchmark index.
HDFC’s capital adequacy ratio stood at 15.2% of the risk-weighted assets, as against the minimum requirement of 12%.
The gross non-performing loans stood at 1.04% of the loan portfolio, marginally lower than 1.16% in the same period of the previous year.
The housing finance company in its statement said: “This has been the lowest level of non-performing loans seen in ...any year in the last decade.’’
Despite HDFC’s robust loan and profit growth, realty experts and analysts are not bullish on the outlook of the sector and see slump in demand for both residential and commercial sectors.
Demand for residential apartments are down by at least 30-40%, said Pranay Vakil, chairman of estate agent Knight Frank India.
With investors staying away, end-users on a wait and watch mode, and no takers for luxury homes, many property developers such as DLF Ltd and Unitech Ltd, the country’s two largest publicly traded real estate companies, are now getting into the affordable home segment for the first time because they are betting that sales are still happening in that segment.
“Liquidity crunch is already there,” said Unmesh Sharma, an analyst with Macquarie Research. “When asset prices are falling, it is very difficult for banks to lend to the real estate sector. Interest rates have also shot up. It will be difficult for real estate developers to raise debt in the next three-six months. While the larger developers are relatively better placed, for smaller developers, it will be really difficult.”
HDFC’s Mistry, however, does not see any slowdown in real users’ demand. The average loan size for HDFC, according to him, is a little more than Rs15 lakh. This essentially means the bulk of its customers are home buyers and not investors.
Mistry does not see any softening of interest rates for home loans unless there is ample liquidity in the system on a sustainable basis.
Shabana Hussain and Madhurima Nandy contributed to this story.