Mumbai: Housing Development Finance Corp. Ltd (HDFC), India’s largest mortgage financier, said on Wednesday that stand-alone net profit in the March quarter rose 17% from a year ago to Rs.1,555 crore.
The profit was higher than the average Rs.1,483 crore estimated in a poll of 31 analysts by Bloomberg.
Income from operations, which includes interest earned from home loans, rose to Rs.5,561 crore from Rs.4,806 crore. HDFC also earned Rs.105 crore as profit from the sale of investments during the quarter, up from Rs.79 crore earlier.
Net interest income (NII) increased to Rs.2,121 crore from Rs.1,867 crore largely due to demand for loans from individuals. Loans to individuals rose 31%, including the loans sold by HDFC, compared with the 13% growth in loans to non-individuals.
“The growth in the total loan book after adding back loans sold is 24% (21% net of loans sold). Of the total loan book, individual loans comprise 68%. Further, 81% of the incremental growth in the loan book during the year came from individual loans,” HDFC said in an emailed statement.
The total loan book increased to Rs.1.70 trillion from Rs.1.40 trillion in March 2012, after selling loans worth Rs.5,175 crore.
Consolidated profit, including that of the company’s insurance business, also increased 17% to Rs.2,083 crore in the quarter ended March. Earnings per share rose to Rs.13.33 from Rs.11.84 last year.
HDFC shares ended Wednesday at Rs.885.60 on BSE, up 3.85% from the previous close, while India’s benchmark index Sensex rose 0.51% to close at 19,990.18 points. The BSE Bankex rose 0.11% to 14,453.21 points.
Besides growing income from its main lending business, HDFC earned premium income from its insurance subsidiaries that increased 20% to Rs.4,665 crore in the March quarter.
HDFC has two insurance subsidiaries, one each for general and life insurance, namely HDFC Standard Life Insurance Co. Ltd and HDFC ERGO General Insurance Co. Ltd.
HDFC Life’s net profit increased to Rs.451.48 crore in the year ended 31 March from Rs.271.02 crore in the previous year, while HDFC ERGO’s profit climbed to Rs.154.5 crore from Rs.39.7 crore.
Keki Mistry, vice-chairman and chief executive officer at HDFC, said demand for loans from individuals and stable spreads were the main reasons for the increase in profits.
The spread on HDFC’s loans over the cost of borrowings for the year ended 31 March was 2.30%, slightly up from 2.27% reported last year.Mistry said he expects the spread to be 2.20-2.35% with loan growth at 18-20% in the next five years.
“This is what we guide our investors and there is no reason why it should change. I expect the housing loan demand to be strong for the long term,” Mistry said. “This year the finance minister has created a one-off tax exemption of Rs.1 lakh for homes worth Rs.25 lakh and below, so I expect a lot of people who had held back their purchase to seek loans.”
HDFC also set aside more money than was required as provisions. “We have set aside Rs.1,792 crore as provisions compared to requirements of Rs.1,506 crore,” Mistry said.
Of the total required provisions of Rs.1,506 crore, Rs.387 crore was on account of non-performing assets, or bad loans, and the balance Rs.1,119 crore was in respect of general provisioning on standard loans, including dual rate home loans and other provisions, HDFC said in the statement.
HDFC’s total bad loans at Rs.1,199 crore as on 31 March was 0.70% of total advances, down from 0.74% in the same period last year.
“This is the thirty-third consecutive quarter end at which the percentage of non-performing loans have been lower than the corresponding quarter in the previous year,” HDFC said.
HDFC’s results were in line with expectations, said Vaibhav Agrawal, vice-president, research, at Angel Broking Ltd.
“Healthy loan book growth and stability witnessed on the spreads as well as on the asset quality front, were the key highlights from the results. We consider the stock to be fairly valued and hence, recommend a neutral rating on the stock,” Agrawal said in a note after the results.