Housing Development Finance Corp. Ltd’s (HDFC’s) September quarter earnings met analysts’ estimates on key fronts. Stand-alone net profit grew 25% from a year ago to ₹ 2,467 crore, slightly exceeding the ₹ 2,431.7 crore estimate from Bloomberg’s poll of 15 analysts. Profit from the sale of investments that rose to ₹ 1,000 crore against ₹ 63.1 crore reported in the year-ago quarter aided its overall performance. This component includes ₹ 891 crore from HDFC Asset Management Co. Ltd’s initial public offering.
Asset quality was stable and net interest margin (NIM) improved to 3.5% from 3.4% in the previous quarter. It should be noted that non-banking financial companies started reporting earnings as per the Ind-As format in the June quarter and NIMs have been calculated as per the new accounting standard.
HDFC’s total loan book grew 17% to ₹ 3.79 trillion, with the individual loan book growing 18%. The mortgage lender’s thrust on affordable housing continues and loan growth is driven by home loans to individuals belonging to the economically weaker and low-income groups.
During the half-year ended 30 September, 37% of home loans approved in volume terms and 18% in value terms have been to customers from these two categories. On an average, HDFC has been approving 8,300 loans on a monthly basis to these segments, with monthly average of such approvals at approximately ₹ 1,354 crore.
As for non-individual loans, as the alongside chart shows, the segment has grown at a comparatively slower pace and is at a multi-quarter low.
Although the non-individual book is more margin-friendly, the capital required here is higher than individual loans and so is the risk factor. And considering the ongoing liquidity-related concerns in the industry and slowdown in the real estate sector, it looks like the mortgage lender may be adopting a cautious approach here.
Meanwhile, ahead of its September quarter earnings, the HDFC stock surged nearly 6% on Wednesday on the National Stock Exchange. However, following the results, the stock ended Thursday’s session down 0.41% at ₹ 1,762.
As for valuations, the HDFC stock trades at a one-year forward price-to-book multiple of four times, which is all right, given its stable fundamentals.