Housing Development Finance Corp. Ltd’s (HDFC) profit after tax for the June quarter was up 20% year-on-year (y-o-y) to Rs779.92 crore, but a part of that increase is due to gains from sale of investments. If that amount is excluded, the y-o-y rise in profit before tax (PBT) is 12%.
That’s disappointing, considering that y-o-y growth in PBT after adjusting for investment profits was higher in the March quarter. Net interest income in the June quarter was up a tepid 2.7% y-o-y. The upshot: the HDFC stock fell more than the Bombay Stock Exchange’s (BSE) Bankex and the Sensex on Wednesday.
Loan approvals were up 22.6% y-o-y, while disbursements were up 20.6% against the same quarter last year. That’s better than the rate of growth in the March quarter, when y-o-y growth in approvals was 20% and in disbursements 17.5%. But it’s not a whole lot better. Outstanding loans were up 12.6% y-o-y at the end of June.
The rate of growth, though, is well below the 29.6% rise in approvals in the June 2008 quarter and the 27.6% rise in disbursements in that period, or indeed the 31% rise in loan oustandings as on 30 June 2008. But then, the economy was much stronger at that time.
HDFC’s outstanding loans to individuals shrank during the quarter, from Rs54,889 crore at the end of March to Rs54,853 crore at the end of June, while outstanding loans to corporate bodies increased from Rs28,416 crore at the end of March to Rs30,436 crore at the end of June. Much of the fresh demand has come from loans to companies. Loans to individuals, which constituted 67.3% of total loans outstanding at the end of June 2008, constituted 63% of total loans a year later. This is a trend that was seen during the March quarter too. At the end of December, for instance, loan outstandings to individuals were at Rs55,899 crore. In other words, between end-December and end-June, loan outstandings to individuals have come down by around 2%.
Also, although from a much lower base, compare LIC Housing Finance Ltd’s 99% growth in loan sanctions and 60% growth in loan disbursements y-o-y in the June quarter. True, the two companies are not comparable, but LIC Housing Finance sanctions during the June 2008 quarter were a mere 18% of HDFC’s sanctions, while that has now grown to 29% in the June 2009 quarter.
Asset quality worsened during the quarter, with bad loans going up to 0.98%, compared with 0.81% at March-end. But that was largely expected.
The stock has underperformed the BSE Bankex largely because of its high valuations. Most analysts have a sum-of-the-parts valuation for the stock that is below its current value.
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