Mortgage lender HDFC Ltd’s profits before tax at Rs1,265.88 crore during the March quarter increased by 23% year-on-year, aided by higher spreads and profit on sale of investments. That’s against a 22% y-o-y rise in profit before tax in the December quarter.
Profit on sale of investments amounted to Rs45 crore in the March quarter, compared with Rs1 crore in the year-ago period. Margins, however, are unlikely to remain so strong in the future. Conrad D’Souza, senior general manager, HDFC, said the firm has been aiming to keep spreads within the 2.15-2.2% range and the 2.31% spread for 2009-12 was an aberration, a result of the fall in interest rates over the period.
Interest paid on loans and on bonds and debentures during the fourth quarter was substantially lower than during the year-ago period and the drop has been much more than the fall in interest earned on mortgages. But increased volume of mortgages should make up for lower spreads.
Loan approvals during the March quarter amounted to Rs19,501 crore, 27% more than during the same period of 2008-09. Disbursements were up 36% y-o-y.
Graphic: Yogesh Kumar / Mint
D’Souza says things are back to normal. At the end of March, growth in the loan book y-o-y was 22%, taking the loans sold into account. That’s an improvement from end-December, when growth was 18% y-o-y. But it’s still some way from the pre-crisis highs. In March 2007, this growth was 25% and in March 2008 it was as high as 28%. Bad loans went down during the quarter, with gross non-performing assets declining from Rs852 crore at the end of December to Rs782 crore at March-end.
HDFC is less exposed to risks from higher interest rates in the bond market, which is probably why it has outperformed the Bankex on the Bombay Stock Exchange in the last three months. That should continue, although the stock trades at around 5.3 times book value as on 31 March.