Mumbai: Housing Development Finance Corp. Ltd (HDFC), India’s oldest mortgage lender, on Friday said its profit after tax rose 22% to Rs 844.53 crore in the April-June (Q1) quarter against Rs 694.59 crore in the corresponding quarter of 2010-11. The net profit was lower than Bloomberg’s estimate of Rs 877.43 crore.
Loans grew 22% to a total of Rs 1.24 trillion compared with Rs 1.01 trillion last year, mainly on demand for loans from individuals.
“Loan approvals grew by 22% while disbursements grew by 20% compared to the corresponding quarter in the previous year,” HDFC chairman Deepak Parekh told shareholders at the company’s annual general meeting in Mumbai.
The growth in both home loan approvals and disbursements was lower than last year, indicating that demand for loans was weakening. Approvals had increased 56% while disbursements had risen 62% in the quarter ended June 2010.
HDFC shares dropped 1.49% to end at Rs 711.95 apiece against the 1.15% fall in the benchmark 30-share Sensex of the Bombay Stock Exchange.
A.S.V. Krishnan, an analyst at Ambit Capital Pvt. Ltd, said that though HDFC’s profit was higher than what his firm had expected, growth could actually slow down during the year in line with likely slower growth in the economy.
“Credit growth, I think, will be around 17-18% and not more than 20% as expected by the market because of base effect. Besides, high interest rates and housing prices will bite,” he said.
Last month, the World Bank cut India’s gross domestic product growth forecast to 8% from 8.8%, citing moderation in domestic demand and elevated inflation pressures.
The World Bank’s projection is in line with the Reserve Bank of India’s (RBI) forecast of 8% for the current fiscal. Economic growth slowed to a five-quarter low of 7.8% during the January-March period. Housing demand, which is considered a proxy for a nation’s economic growth, has also slowed.
On Thursday, Aatash Shah, a research analyst at Nomura Financial Advisory and Securities (India) Pvt. Ltd, said in a report that registration of property sale agreements within Mumbai city limits had fallen 30% in June.
“As per the Maharashtra state stamps and registration department, in June 2011, 4,272 property sale agreements were registered within the city of Mumbai. This is the lowest figure in the past six months. Between January 2011 and June 2011, 29,684 property purchase agreements were registered, a fall of 20% year-on-year,” Shah said.
Homebuyers are delaying purchases mainly because of high real estate prices and also because interest rates have risen in the last one year as RBI has raised its policy rate 10 times since March 2010, from 3.25% to 7.5%.
The effects of slower growth have also been seen on car sales. They grew in June at the slowest pace in two years. During the month, India’s top three car makers, which account for two-thirds of domestic sales, reported a 4.5% drop in sales volumes.
Ambit’s Krishnan said besides slower demand for loans, HDFC will also have to deal with a likely increase in provisions on retail loans this fiscal.
“There is a proposal to increase the provisioning on standard retail assets from 0.25% to 0.4%, which may impact HDFC profits by 6.5-7% going forward,” he said.
Standard assets are loans that pay interest regularly and are, hence, least risky. The National Housing Bank, the regulator for housing finance firms, is proposing an increase in the provision to bring it in line with banks.
HDFC’s earnings per share improved to Rs 5.65 versus Rs 4.71 last year.
IndusInd Bank net up 52%
Meanwhile, private sector IndusInd Bank Ltd said profit increased 52% to Rs 180.18 crore, due to growth in both interest as well as fee income.
Its net interest income grew 32% to Rs 390.01 crore compared with Rs 295.68 crore during the corresponding period last year, a growth of 32%.
“Core fee income grew by 44% due to increase in our third-party products, trade and remittances, foreign exchange and investment banking income,” managing director and chief executive officer Romesh Sobti said.
Core fee income was higher at Rs 187.07 crore against Rs 129.58 crore in the corresponding quarter last year. The bank’s net interest margin, or the difference between interest earned and interest expended, improved to 3.41% from 3.32% last year.
IndusInd Bank shares rose 0.74% to end at Rs 286.65 apiece on Friday.